This being National Retirement Planning Week, the Times-Union talked with
Let's get right to it, what are the biggest mistakes people make in retirement planning?
I was just dealing with one of those. It's lump sum debt distribution. That's people taking big large amounts out of their 401Ks or IRAs to pay off cars and houses. They don't want to carry the debt, but they underestimate the tax implications and the impact on their income.
Half a million dollars is now a quarter million. But your future income depended on that half-million.
Also, when they have their accumulated assets, instead of sitting down and figuring out how much they need for their lifestyle, they ask “How much can I get from it?”
They'll max out with the most they can get. And then when the market goes against them, they haven't left themselves a cushion.
Should people plan or hope to match retirement income with their working income?
Most people overestimate their monthly income need in retirement by a long shot. They're calculating based on their income of which they're already allocating money — FICA taxes, 401K, IRA contributions, debt reduction, etc. — which are generally no longer expenses during retirement. The stats show that people nearing retirement age are living off 68 to 70 percent of their wages.
But isn't it the industry standard that you need 80 percent of your working income?
Unfortunately, yes. But they're already living on less than that.
Don't they spend more? When we're working, we spend more on Saturday than on Wednesday. When you're retired, every day is Saturday.
Retirees spend money differently. Money previously used to pay for these things are now allocated to their retirement lifestyle. Unless retirees are planning for a very different lifestyle during retirement, I find that the 80 percent income replacement rule is a bit high — though, obviously, every person is different.
People end up living a lifestyle very similar to what they did before they retired. They may say they want to travel. But if they haven't been travelers, they stop after a year or two. Then they go back to their same habits, the same church.
Does everyone need a financial planner?
Not necessarily. But if you don't have a financial planner, do you also not have an attorney, CPA, insurance guy? No one can be an expert in all areas. If you don't have a financial planner, that's great. But you still need a tax guy, an estate planner. If you want to be the CEO of your retirement plan and can handle it, then you don't need me.
When should you start retirement planning other than right now? Is that an age?
Yeah, start right now.
Is there a point when it's took late to do anything?
It is never too late for retirement planning because there isn't an ending point for retirement planning. As we age through retirement, our circumstances may also change. Things like family situations, taxes, lifestyle choices, and health care circumstances will be different — you could have the greatest plan in the world, but remember that is just a plan. You need to count on things not going as planned and adjust accordingly.
Obviously, it depends on expenses and lifestyle, but are there any ballpark minimums that you recommend people have to retire?
I get that question from clients a lot. It's just so different. Some of the most successful retirees are the not the ones with the greatest net worth. They live within their comfortable needs. They have control over their expenses and, more importantly, over their debt.
I've read some really surprisingly low figures for average net worth of Americans. The average for a household of 55- to 65-year-olds is
Those are real and it's downright scary.
No. 1 is the lifestyle choices that 60-year-olds made when they were 30. They were making good money, but it was the 1980s and they were spending it.
Is that unique to baby boomers, or were their parents in the same shape?
Your parents had pensions. Your parents were savers. They went through the Great Depression, and you had to pry pennies out of their hands. But they weren't investors. Boomers are investors, but they aren't savers.
And their parents didn't have to worry because they had pensions. Get a job, work there for 40 years and you're OK. Now, you work someplace for five years, cash out your 401K and go to the next job.
I've read that millennials are better savers.
That doesn't surprise me at all. Millennials understand that
Here's a pretty key question: When should you start taking
I don't recommend taking it while you're working. Textbook is wait until its full, age 66 or 67. There's no reason to take it and pay tax on 85 percent of it if your household income is over
Do you see 70 as the new retirement age?
I have yet to work with someone who says they saved too much, but often hear “I wish I would have retired sooner.” A report came out last week that showed the average retirement age in
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