Full Blown Retirement Plan

Occasionally I have people tell me that they’d rather work with a Certified Financial Planner (CFP). I think it’s because those people don’t think my services cover the gamut of retirement planning concerns.  Mostly I don’t have the designation because I don’t see the value add. I don’t feel it’s worth the time or money to have an unrelated third-party organization give me permission to put some initials on a business card. But it looks good so people like it, often without truly understanding what it means.

A few weeks ago I got an email from a guy I’ve been talking to and he sent me a list of concerns he had for his personal plan. Right off the bat I knew that I had either a newsletter and/or podcast for almost every topic below. Anything missing can be added to the library, including a few that will take a topic into more detail. BelowI share the list of concerns and add commentary along with the link to the appropriate page on the website.  His questions in bold and my responses are in regular font with applicable podcast or newsletter beneath.

minimize market risk while maximizing guaranteed income potential because legacy planning isn’t a primary concern at this point as we are planning on passing on our property and physical assets to our children..not necessarily financial assets

This comment underscores the importance of using annuities to generate income in retirement. It removes market volatility from the equation and with no need to use financial assets for a legacy, you will more easily be able to maximize cash flow on a monthly or annual basis.

Newsletter:  The Case for Annuities in a Retirement Portfolio

Podcast:  Annuities Create a Legacy

How to best fund long term care expenses but not forfeit the money if LT care isn’t used. It seems as if LT Care Insurance is losing favor so should we consider an annuity that is 7702B compliant? Why? Why not?

It’s not so much that long term care insurance is losing favor, it is that it can be cost prohibitive if started in your 60s. Many people also don’t like the idea of paying for it, maybe not even using it and never getting money back. Long term care annuities are one solution to that because you have the ability to maintain the asset and can change plans and use the money if you decide to spend it down several years from now. Life insurance is actually another really great asset to use for this, with accelerated death benefits for qualified long term care expenses and cash value that can be used to supplement retirement income down the road. Each will come with a cost but potentially save you a substantial amount of money one day. I have a podcast that explains all the options with LTC annuities. I will add an episode on life insurance soon but I don’t have it yet.

Annuities and Long-Term Care

Social Security benefit planning

Fortunately this one is very simple. My advice has always been to take it as soon as you can get it.  Honest calculations bear that out. If you delay then it costs you money so you have to supplement income from other assets. When that cost is factored in, you’ll find there is no monetary benefit to waiting for higher payments. You may however be motivated to keep working in order to increase the benefit but once you retire you should apply for it right away. There aren’t nearly as many options for maximizing payments as there used to be so this is an easy variable to consider. I’ve detailed this in newsletters for years but a podcast last year is the most recent.

Maximize Social Security

Medicare expense planning

This is one that I haven’t covered in detail because it is what it is. As long as you and your wife have paid taxes for ten years then Part A is covered. Part B and D require premiums and those basically cover physician services and prescription drugs. Costs are relatively minor but should be considered as part of a retirement budget. A couple hundred dollars a month should cover parts B and D, unless you find yourself in an IRMAA situation where combined taxable income is over $194K. There’s a two year look-back on the income requirement but with a few other clients I have found a solution.  In other words, don’t worry about it if you run into that but you should call me.

Health care expenses are what I would consider to be the biggest additional expense for those who retire before 65.  Once you get to MediCare it won’t be as big a deal. Additional premiums for part B and D can be accounted for ahead of time and any care that involves deductibles or copays would be classified as discretionary income. This is exactly why it’s important to keep a pool of cash handy for things that come out of nowhere but it’s easy to accomplish with a basic emergency fund.

Tax minimization strategies (Roth conversions, etc.)

Steady distributions from a retirement account is the best way to project taxes over time and likely pay the least amount as well. It’s nearly impossible to maximize income from an IRA and do Roth conversions. For many it’s going to depend on the mix of qualified vs. non-qualified assets. A newsletter I wrote in 2019 does a pretty good job of explaining when a conversion works and when it doesn’t. 

Reality of Roth Conversions

Guaranteed income floor

Establishing this as a foundation is the single most important thing you can do to set yourself up for a comfortable retirement. Knowing you never have to worry about monthly income makes everything else much easier. If done correctly and efficiently, you can use remaining funds for every other planning objective. Over the past 15 years I’ve had to use several different strategies for setting up an income floor because rates kept dropping and the best option was always changing as well. Now we have better rates so I am confident a guaranteed income product will give you the most benefit. I wrote about this change early this year and it’s a good lesson that fits your situation.

Guaranteed Income Is Back!  Newsletter or Podcast 

Inflation protection planning. Should we consider purchasing an annuity product with increasing distributions? SS benefits will provide some inflation protection but we may want more.

I am not a fan of inflation protected annuities. The cost for an equal payment stream can be up to 30% increase over an annuity that offers level payments.  t’s best to save the money up front and count on growth of that asset to offset necessary income increases. It’s a double win when you are able to have the additional money available for the other expenses you may need to cover in retirement. This is where flexibility with assets is incredibly important. I wrote about this specifically almost five years ago and the lesson holds true today.

Annuities and Inflation

I am thinking of sub-dividing our holdings; not the full-blown bucket style planning but I do like the idea of:

  • establishing some funds that are liquid but still have some earning potential (emergency money to cover spikes in income needs)
  • using the largest percentage of our holdings to guarantee income so we can sleep well at night
  • using some holding for longer term growth but still having access to the asset

This essentially underscores the need for a good financial plan in retirement and hopefully my comments will help you realize how easy it is. Everyone needs guaranteed income, an emergency fund for unexpected expenses and additional investments that allow future planning changes. Guaranteed income is a simple matter of deciding how much you would like and finding the most efficient way to produce it. Emergency funds are a personal matter because everyone will throw out a different number.  You and your wife need to agree on how much should be set aside so that you don’t have to worry about anything unexpected. Additional investments are a personal matter as well. Some will choose to be very conservative while others will take some risk and shoot for top line growth. It’s not all or nothing by any means and a qualified investment manager can help you figure it out.

What documents need creation/review/updating?  (proper titles, payable upon death signatures, beneficiary designations, insurance policies, durable power of attorney, a will or trust, medical directives, etc.)

This is what ties it all together. My first recommendation is to make a master list of all assets and account numbers with contact info for any advisor who can assist with each account. I think the best thing to do is set up a living trust that dictates your wishes with all assets if you are no longer able to preside over it.  You can do it with a will but a trust has more power and will make things more convenient for you and your heirs. The trust can be named as beneficiary of all accounts and define protocol of situations involving power of attorney or medical directives. It’s a relatively simple process that will organize everything for you and your family.

If I left anything out that someone feels is material to general planning in retirement then please let me know. Even the couple who asked these questions has a couple things that are not standard but need to be addressed. The simple matter of retirement planning is mostly about rules, and years of dedication make us better at helping.  Math is the easy part. You have done the hard part to get to this point so find a person who knows the rules and you’ll have no problem making the transition.

I’m here to help if you want honest advice. Call or email anytime.


Podcast about A Full Blown Retirement Plan

In this insightful episode, Bryan Anderson, seasoned financial expert, exposes the often-overlooked realities of retirement planning.

Bryan draws from his extensive hands-on experience to illuminate aspects of financial planning that many Certified Financial Planners (CFPs) may gloss over, arguing that real-world expertise often outweighs the glamour of the CFP title.

Bryan outlines the essentials of creating a successful retirement plan, emphasizing the importance of flexibility, liquidity, and personalized strategy.

Listen in as Bryan goes beyond textbook advice, offering invaluable insights for a secure, prosperous retirement.

Resources: (Including All Links Mentioned in podcast): Full Blown Retirement Plan Newsletter

Last Updated on February 6, 2024 by Bryan Anderson