Month: October 2022
Retirement Planning Timeline
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Hi everyone the lesson here for money evolution calm in today’s video I’m going to be talking about the retirement planning timeline and some of the key ages and milestones that you might want to think about in terms of your financial planning and getting ready for retirement so let’s start all the way over here on the left at age 50 is what we call where the serious retirement planning phase begin so that’s the age where oftentimes people may have gone through a major transition maybe your kids have moved out of the house maybe your cash flow is starting to improve because maybe you paid some debts off or your house off or you’re just starting to think about hey if we want to retire in 5 or 10 years what do we need to do to make that happen and what are some of the planning steps so 50 is the serious planning phase begins age 55 is another key milestone then not a lot of people are aware of but that’s the age where if you get to that age and you’ve retired on or after your 55th birthday you can take penalty-free withdrawals from your 401k plan so that’s a question we get a lot where somebody wants to retire 57 or 58 and they want to start taking some withdrawals but they don’t know how to do it well if as you keep the money in your 401k plan you can take those penalty-free as long as you separate after age 55 59 and a half is what we call the normal retirement age that’s where you can start taking penalty-free withdrawals from all of your retirement accounts 401ks and IRAs so that’s the magic age that the IRS has put on us 62 is the age when you’re eligible for Social Security benefits as an early collector so that’s the earliest that you’re eligible for your Social Security benefits 65 is the age where Medicare kicks in so that’s another important milestone for many of you watching this you may want to retire prior to age 65 unfortunately before age 65 you’re going to either have to hopefully have some insurance provided by your former employer or you’re gonna have to go out into the exchanges and buy that insurance on your own that’s something we talked about and some of our other videos there but 65 things get a little bit better you get on Medicare age 67 is what we call the full retirement what Social Security ministration calls your full retirement age so that’s where you get unreduced Social Security benefits and then at age 70 is the latest that you can delay collecting Social Security so if you wait past your 67th birthday you’re going to get about an 8% increase for every year that you wait but you can wait past that 70 but doesn’t make sense to you’re not going to get any additional benefit by waiting past age 70 and then 70 and a half is where whether you have a retirement withdrawal strategy or not the IRS has one for you and it’s called the required minimum distribution rules or RMDs and that’s basically if you have money in traditional retirement accounts the IRS has said hey you’ve gone long enough without taking it in this money out you need to start taking withdrawals and start paying some of the taxes on that money so all of this here that we’re looking at if you think about how your income and expenses work while you’re still working they’re gonna be you know pretty consistent you’ve got some income coming in you’ve got some expenses hopefully you’ve got some cash flow leftover at the end hopefully you’re saving some of that additional cash flow but then once retirement kicks in let’s say you retired at age 57 well you might not have any income coming in or maybe you have a small pension or a big pension coming in but you’re not even eligible for example to get Social Security benefits you may have higher expenses because you’re paying healthcare premiums out in the exchanges so at age 62 if you take Social Security benefits maybe that kicks your income up maybe your expenses go down once Medicare kicks since there’s a lot of this variability that’s going on so one of the things that we want to understand as we’re going through this retirement timeline is we want to understand a couple of things we understand what is our income today and more importantly or more specifically we want to know what is your tax rate today because that’s going to be very important for us in determining what that future withdraw strategy is going to be and maybe how or where we save that money while we’re still working so that’s very important versus that tax rate out here in retirement the other thing we want to understand is what we call your retirement gap and everybody pretty much has a retirement gap that’s why you say money for retirement so that you can start to take some withdrawals from your portfolio but understanding that gap is going to tell you or us how much money you might need to take from those retirement accounts it’s also going to factor into the more money you have to take out the higher that tax rate is going to be so we’re going to start to learn a little bit about what those tax rates are going to be throughout retirement and one of the things that we notice is generally from the time somebody retires to maybe age 62 or maybe even all the way to age 67 if you delay taking Social Security these are what we call the low tax years for many people and that that gives us some opportunity to do a couple of things number one it gives us a strategy for taking withdrawals because in these low tax years if we’re in a lower effective tax rate we can take more money out of those retirement accounts and do it at a reduced tax rate we also can look at doing something called a Roth conversion and so basically what that is is saying okay we’ve got some money in a traditional retirement account and hopefully if that money grows between now and age 70 and a half those accounts can sometimes grow fairly large which means that at age 70 and a half if you haven’t done anything preemptively before then you could end up in a potentially really high tax bracket so by doing a Roth conversion and taking advantage some of these low tax years kind of preempts that a little bit and as allows you to kind of spread that income out over a longer time period so having some really low tax years here and some really high tax years there we can kind of spread that out and keep hopefully things at a lower tax rate throughout retirement so those are some of the planning strategies that we do the other factor that goes into play here on having higher taxes is that also is going to affect your Medicare premiums so Medicare premiums if you don’t know already is tied to the amount of income that you made from actually the prior two years ago basically and higher that income is the higher the Medicare premiums are going to be and sometimes that could be substantial as well so by keeping that income a little bit more consistent hopefully can maybe keep your Medicare premiums a little bit lower as well so these all of some of the planning strategies that go into it the last thing I want to talk about here is in looking at some of these low tax years the potential RMDs we want to look at where are you contributing money while you’re still working and oftentimes what we see a lot is that people have put the majority of their money in traditional retirement accounts those are monies that they get an immediate tax benefit today because it comes off of your income and that’s what people like but again what that might be doing is putting them in a position where they’re paying more taxes in the future so for a lot of people you might want to consider look at making Roth contributions while you’re still working and balance that out a little bit because that’s going to be a situation where you’re not getting any tax benefit today but you can take tax-free withdrawals in retirement so it gives you a little bit of a balance there so hope this has been helpful hope this is helped make some sense on some of the things you should be looking at at these different ages this is something we do all the time with our clients and we do this through our wealth vision comprehensive financial plan of course we get into a lot more detail a lot more information about the tax rates and some of these strategies here
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Alice Cooks Up A Great Retirement with the Concordia Retirement Savings Plan 403(b)
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Alice is a school teacher at St. Paul’s Lutheran School. She recently had a conversation with her students about goals. While it’s a way’s off, she’s started thinking more about her own goals, especially with retirement. Away from school, Alice loves to bake. There’s nothing better to her than putting the right ingredients together and creating a tasty treat for her kids and their friends. Alice has started to look at retirement the same way she does baking. If you mix the right ingredients together and have a little patience, you’ll end up with something rewarding when the time comes.
Alice is smart. She’s knows the three key ingredients for retirement income. Let’s turn it over to our retirement chef to explain. Thanks Narrator Guy. So my first ingredient is the Concordia Retirement Plan pension fund. Check out that video out to see what an amazing benefit the pension is! The second ingredient is Social Security. I’ve been paying into this government fund since I started working. When I retire, I should receive money back to help me lead the life I want to live. But it’s the third ingredient that really helps me know I’ll have enough retirement income to meet my expenses.
It’s the Concordia Retirement Savings Plan 403(b). A 403(b) is the non-profit version of a 401(k), and the CRSP has some of the lowest fees available. That means I get to keep more for my retirement! As soon as the CRSP 403(b) began, I started investing because I knew this ingredient was in my control. I have my employer put some of each paycheck into the plan. I know that, if I need to, I can pause or change my contribution because the CRSP is so flexible. But even when things were tight or the markets were down, I still regularly saved something for retirement. It was like “set it and forget it and you won’t regret it!” I’m a baker, not a banker, so luckily Concordia Plans has top-notch experts who mixed my investments among the funds they offer. I didn’t need to be an investment expert, but when I wanted to learn more, CPS always had resources available to help. When I retire, I’ll still have expenses to pay for. Some of them, like medical costs, will probably rise. Thanks to my commitment to the Concordia Retirement Savings Plan, I’ll have enough money to pay for what I need.
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