Mike Palmer's February Column in Kiplinger: Five Things to Consider Before You Retire
How Many Americans Plan to Retire This Year?Over 11,000 Americans will retire each day in 2024, what has become to be called the "year of Peak 65." In his Kiplinger column Ark Royal Wealth Management's Mike Palmer outlines five things everyone should consider before they retire. Learn how to make the most of your retirement years.
How Many Americans Plan to Retire This Year?
Over 11,000 Americans will retire each day in 2024, what has become to be called the "year of Peak 65." In his Kiplinger column Ark Royal Wealth Management's Mike Palmer outlines five things everyone should consider before they retire. Learn how to make the most of your retirement years. Click here for the full article.
Do I Have Enough Money to Retire?
One of the most critical questions to address is whether you have enough money to retire. Here are some key steps to evaluate your retirement readiness:
1. Assess Your Retirement Needs: Estimate your annual expenses in retirement, including housing, healthcare, travel, and daily living costs. Consider potential changes in spending patterns and account for inflation.
2. Calculate Your Retirement Income: Add up all sources of retirement income, such as Social Security, pensions, retirement accounts (401(k), IRA), and any other savings or investments. Compare this total to your estimated annual expenses.
3. Evaluate Your Savings: Financial planners often suggest having enough savings to replace 70-80% of your pre-retirement income. Use retirement calculators to estimate how long your savings will last based on your current savings rate, investment returns, and withdrawal plans.
How Can I Pay Less Tax in Retirement?
Minimizing your taxes in retirement is one of the main ways we help clients preserve wealth and maintain your desired lifestyle. Here are some strategies we use to do this:
1. Diversify Your Income Sources: Having a mix of taxable, tax-deferred, and tax-free accounts (like Roth IRAs) in addition to Social Security allows for more flexibility in managing your taxable income while meeting your cash flow needs.
2. Strategize Withdrawals: Plan the order in which you withdraw funds from different accounts. Typically, it's advisable to withdraw from taxable accounts first, followed by tax-deferred accounts, and finally tax-free accounts. This can help manage your taxable income and keep you in a lower tax bracket.
3. Consider Roth Conversions: Converting a traditional IRA to a Roth IRA can be beneficial if you expect to be in a higher tax bracket in the future. While you’ll pay taxes on the conversion now, future withdrawals from the Roth IRA will be tax-free.
Considering Taking More than Your Required Minimum Distributions (RMDs): After age 73, you must start taking RMDs from your tax-deferred retirement accounts. Failure to do so can result in significant penalties. Strategize your RMDs to minimize the tax impact.
When Should I Claim Social Security?
Deciding when to claim Social Security benefits can significantly impact your retirement income. Understanding the benefit differences between Full Retirement Age (FRA) and early retirement is critical. Additionally, if possible we encourage most clients to delay Social Security to age 70 to get the maximum benefit. Delaying Social Security past your FRA, increases your benefits by approximately 8% per year until age 70. This can result in a significantly higher monthly benefit. We can perform a break-even analysis to determine the age at which the total benefits received from delaying Social Security surpass the benefits of claiming early.
We can help you analyze your specific situation to provide financial security and peace of mind.
