Are You Retirement Ready?, Episode #8

In this episode, we cover the six key areas to focus on when planning for retirement. First, review your expenses and project what retirement will look like for you. Second, have a strategy for Social Security and when you plan to file for benefits. Third, understand what will make up your retirement paycheck. Fourth, know what your healthcare plan is, both before and after Medicare. Fifth, focus on minimizing your lifetime tax bill and understanding some of the critical tax planning windows. And lastly, create your SWAN (sleep well at night) investment portfolio by figuring out the right mix of stocks and bonds for you. Listen to hear the details on each of these key points!

Outline of this episode

• Six key items everyone will face with retirement [0:57]
• Financial independence vs retirement [2:02]
• Ideal retirement & expense projections [2:37]
• How you should think about Social Security [6:00]
• Why you might consider delaying Social Security [8:44]
• Creating a retirement paycheck [11:06]
• Planning for healthcare costs [13:30]
• Tax planning for retirement [16:04]
• Why and how your investments should change with age [19:58]
• Avoid getting too far into the weeds [23:24]

Understanding Social Security and how to get the most out of it

For many people, Social Security (SS) is a material source of income in retirement. Before people get overly worried about their benefits, it’s important to note how small changes can greatly expand how long the fund will last. You want to be aware of the issues, but not be overly conservative and assume that SS will go away entirely. The SS benefit you’ll receive varies depending on your work history. There’s a cap for both how much you pay into it each year and the eventual benefit that you’ll be eligible for. For physicians, you’ll receive the maximum benefit because you’ll pay in the maximum amount throughout your career. Interested in when you can collect and when you should for maximum benefit? We discuss this in more detail in the episode.

Your retirement paycheck

How do you create a retirement paycheck? You’re used to getting a regular paycheck from your job each month. In retirement, that paycheck goes away and you’ll need to replicate it using your investment accounts and other income sources. It can be overwhelming thinking about how to use your Social Security income and various investment accounts to fund your lifestyle, which is why we like using the paycheck approach. It makes a seamless transition from work to retirement, at least in terms of your monthly income. Essentially what you do is set up a recurring monthly or twice a month deposit from your investment accounts into your bank account to replicate the income you received each month during your working years. Listen to the episode to hear the full story on this important planning step. 

Who thinks about taxes when thinking about retirement planning?

Tax planning? This is something that people tend to think about a lot during their working years, but tax planning in retirement doesn’t always get the attention that it deserves. Which is too bad, because there are a lot of opportunities available. During the working years, tax planning for most physicians is somewhat straightforward, at least conceptually, since the goal is to take advantage of all the tax deductions available to you while you’re in your peak earning years and therefore your peak tax bracket. However, when transitioning to retirement, the strategy tends to change. The goal shifts from a focus on minimizing taxes in any given year to minimizing your lifetime tax bill in retirement. Unlike during your working years where you had a steady paycheck that was taxable, you now have the flexibility to choose how you withdraw from your accounts to make up your paycheck. This is important because, as mentioned in the episode, different accounts have different tax treatments. Listen to learn more.

Resources & People Mentioned

• Downloadable retirement checklist

Connect With Trent and Andrew

• https://mdwmllc.com
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