Dear Financial Partners and Friends!
If we were to ask what percentage of your final salary you will need in retirement, you could probably come up with an answer off the top of your head. In reality, determining what you will need to live on and making sure you have enough to meet that need is extremely complex.
A front-page article in the Wall Street Journal’s Wealth Management section on September 4, 2018, by Dan Ariely & Aline Holzwarth, made this astute observation: “Answering a question as complex as this requires knowledge far beyond most people’s grasp—and far beyond the grasp of many professionals.”
Why is retirement planning so difficult? Because it’s all about longevity, the future cost of federal and state taxes, cost of property taxes, cost of health care, cost of long-term care, the opportunity cost of being too conservative or the penalty cost of being too aggressive, cost of living, as well as daily living and possible travel expenses, just to name a few. Retirement cash-flow planning is not for the faint of heart.
While many think that health care cost will be the largest expense in retirement, the surprise is that for most folks, taxes are the single, largest expense. It’s impossible to generalize for everyone, but taxes are levied on withdrawals from qualified retirement accounts such as IRAs, 401(k)s, and pensions. If you have too much income, your Social Security benefits may also be taxed during retirement.
Integrating tax planning with cash-flow planning may help bring considerable and tangible benefits. Preserving your hard-earned dollars through tax planning is crucial in delivering and providing a sustainable cash flow during your retirement years. Having said this, melding tax planning and cash-flow planning is very complicated.
The great news is that you don’t have to go it alone. At Smedley, we can help you navigate the white waters of retirement tax planning and cash-flow planning. Please come and talk with one of our expert wealth managers who have the experience, credentials, and training to guide you to and through your retirement years. Your financial success is our passion at Smedley Financial.
Roger M. Smedley, CFP®