Ten Years to Retirement? 4 Thoughts for Your Finances

Today I want to talk about four things I think you should be thinking of if you within 10 years to retirement. First, I just want to introduce myself. My name is Warren Berger. I'm the owner of Luminary Financial Advisors and we help people that are approaching retirement. We're just recently retired, create a financial plan that emphasizes saving money throughout the course of your retirement on taxes. So retirement is a process. It's not necessarily a light switch that you're just going to turn on or off at age 62 or 65 or wherever it is that you've decided to retire. It's a stressful time. There's a lot of transition. You're, literally going from having accumulated money throughout your life to now you're starting to take money from that nest egg. And so you want to make sure that you're as prepared as possible. Number one is pretty simple. What are expected expenses going to be in retirement?

And they are going to change, right? If you're a commuter, you no longer have a commuting expense or any other associated expenses with going out to the workplace. And, you know, you now may be transitioning to spending more time doing some traveling or some bucket list items. So we really just want to see, you know, what expenses are kind of going to go away. And then what expenses maybe are expected to increase potentially your vacation expenses or something like that. Trying to get a handle on what those expenses might be. And then you're going to start looking at that every year and seeing how that changes, right? As you get closer to retirement, your view might change a little bit. So if you could just start getting a picture of that as you move along, by the time you get to retirement, it might come into a lot clearer focus.

And now you know what you're dealing with in terms of, you know, Hey, how much money are we going to have to come up with? And that leads right into our second point, which is, what are the sources of your retirement income going to be? Some people have pensions in place. Are you going to use social security? If so, when are you going to claim social security? Do you have other sources of income from from a 401K or a 4 57? Is there a Roth IRA out there? Do you have a taxable investment account? Once you start getting a sense of what these sources of income are going to be, you can start to get an idea about how you're going to apply those to the expenses that you just did in step one. Point number three is really about what kind of actionable steps can you take between now and when you're planning on retire to make that as seamless a transition as possible.

Now that could include starting to change the way that your assets are allocated. You may want to start changing the ratio of stocks that you have to bonds so that you're less prone to the volatility that we've seen recently in markets. You may want to start proactively creating different tax accounts that you'll be able to use in retirement. I'm going to talk about that in a second. But you for instance, may want to start contributing to a Roth account tax free account. You may want to contribute to a taxable account, which are tax capital gains, which might end up being more beneficial to draw from earlier in retirement than your tax deferred account, which is going to be taxed ordinary income rates. So these are things that you, you can start thinking about and maybe start saving into different accounts then maybe we thought of before, because now

You're actually trying to sort of put these pieces of the puzzle together before you actually hit retirement. The last point, and I think the most important is taxes. Taxes are probably going to be the biggest bill that you pay over the course of your retirement. And in some cases it's six figures, high, six figures even, potentially more so the extent to which you can mitigate paying taxes. I'm all for paying our fair share of taxes. I'm just not interested in leaving a tip for the irs. So when it comes to taxes, it's going to be really strategic about how you're going to be taking from the different accounts that you have. And that's going to be dependent on some of these things that we already talked about. What are your sources of income, how we're going to get that income out in the most tax efficient way possible?

And then also potentially some strategies that you're going to put in place to mitigate future taxes as you enter into retirement as well. So that tax component is something that you really want to think of. Are you going to be taking from taxable accounts if you have them first that are subject to capital gains? There's a combination of that potentially with the ordinary income that you pay in taxes on your tax deferred accounts like your 401k. And then of course you always have that tax free account potentially with a Roth, and you want to try to figure out how you're going to put those together to be able to get all the income that you need, but to do it by managing the tax brackets in the most efficient way possible. So if you can start to get your head around these four topics, I think you'll start to see that your retirement income planning is going to come more into focus and that transition, that sort of stressful transition from working to retirement can end up going a lot more smoothly if you're on top of these things and you've been proactive.

I hope this video has been helpful. If you're on Facebook, we have a retirement group on Facebook called 10 Years to Retirement, aptly named for this video basically where we put out educational information about topics of concern to people that are getting near retirement or just recently retired. We've also included in the comment section below some flow charts and some checklists for retirement planning subject that I think will be helpful for you as you get closer to your retirement. And then if you're interested in having a complimentary conversation with me about your personal financial situation, I've also included a link to my personal calendar below, and we'll make sure you get pointed in the right direction. Thanks for watching this video and I hope to see you again.