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tax efficiency in retirement

You may not realize it, but Uncle Sam becomes your partner in your retirement.

Back in 2010, Lincoln Financial Group sponsored a survey of affluent retirees that shows how big of an effect taxes may have. The survey gathered data from people ages 62 through 75 with annual household incomes greater than $100,000.

Of all retirement spending areas, the study found that federal income taxes were the retirees' largest expense. "They are greater than many individuals planned for prior to retirement—and a growing source of concern," the survey reported.

If you don’t want everyone’s least favorite uncle to be the "majority owner" of your retirement income, it’s important to take steps to maximize the tax efficiency of your retirement income plan.

social security medicare filing deadlines importance

If you think choosing when to start claiming Social Security benefits can be confusing, you’re right. But did you know there is even more to consider when deciding when to start collecting those benefits?

If you are approaching or planning for retirement, you need a Medicare enrollment strategy that synchronizes with your Social Security claiming strategy in order to:

  • Reduce your risk of losing benefits,
  • Prevent you from incurring penalties, and
  • Maximize your benefits from both programs for the rest of your life.


Medicare and Social Security are programs that "talk to each other." Missed deadlines or poorly-timed benefit claims could mean as much as thousands of dollars of lost income. 

What we don't know can hurt us. So, here's a quick look at why you must verify deadlines and information for each program so everything is done right.

retirement planning challenges for women

Women are taking a greater role in household money matters, according to a new report by Allianz Life. But despite this, many women face the prospect of an underfunded retirement.

In the study, 51% of women said they are the “chief financial officer” of their household. When it came to managing finances, 53% said they hold “a great deal of responsibility” or “all of it.”

Nevertheless, signs indicate that women face unique challenges on the retirement planning front. Rising life expectancy, lower lifetime earnings, and reduced savings all contribute to a significant retirement income gender gap, reports Prudential Research.

Sure, these challenges may seem considerable. But the good news is you can do many things to strengthen your retirement security and financial confidence.

Confident decisions start with being well-informed. So, as you plan for your retirement, it’s important to understand the challenges facing you and other women today. Here’s a quick look at some common issues that will likely come your way.

americans retirement knowledge stand

Virtually everyone understands that money doesn’t grow on trees. But what about planning for retirement? If recent research gives any indication, many Americans may be coming up short. In the 2017 Retirement Income Literacy Quiz – courtesy of The American College for Financial Services and the New York Life Center for Retirement Income – most quiz-takers received barely-failing or below-failing grades.

To measure retirement literacy, the test comes with two options: a six-item questionnaire on key retirement planning areas, and a more comprehensive test with 38 questions. With retirement literacy and retirement planning success being closely linked, you may want to check out the six-question quiz yourself to gauge your own retirement readiness.

So, what exactly did these questions ask? And how did Americans fare in their retirement knowledge? Let’s delve into the data now.

understanding risk tolerance for retirement planning success

Like everything else we do, saving for retirement involves risk analysis. We might not think about getting in the car to go to the grocery store, or even booking our dream vacation to hike the Inca Trail in Peru, as particularly risky decisions. But there are still elements of risk involved in every choice we make.

Your risk tolerance will help to you maximize and protect your retirement savings when you make sound choices. As you save and near retirement, your risk tolerance should change, adapting to your financial and income needs. In order to manage your retirement planning effectively, you need to understand your risk tolerance, grasp your financial needs in retirement, and make effective decisions about your savings and asset allocation.

Overall, you should be ready for a “smooth” financial transition into retirement – when you stop earning a full-time salary or business income, and start drawing on the savings you accumulated over many years. Working with a financial professional will help you meet your retirement income and financial goals, like the independent financial professionals at SafeMoney.com.

Let’s go into more detail about risk tolerance and why it’s so important.

Time to diversify

You’ve heard it before: the best laid plans of mice and men often go astray. Through all stages of our personal and financial lives, we know there will inevitably be twists and turns. The market goes up, the market goes down. But there are safer routes than others for our money. While there’s no foolproof Waze app for retirement savings and investment, there are directions we can take—and avoid!

First, Let’s Look at Your Withdrawal Rate.

Two key players in the viability of your financial plan for retirement are the size of your retirement nest egg and the pace at which you plan to spend it. This is your withdrawal rate. After putting in the time and consideration to determine the magic number for your retirement and your intended rate to spend it down, you may have reservations about your actual investment portfolio and whether it will perform as expected to sustain you over time.

Since no one can say how long you will live, our lens of The Rule of 100 helps add perspective to this all-important strategy of making sure your retirement income will last.

Can You Afford to Gamble with Your Retirement Money

The stock market has been surging to new highs. For the first time ever, the Dow Jones exceeded 20,000 in January. Then on the heels of President Trump’s first address to Congress, it charged ahead yet again. The Dow posted a 300-point jump, closing at over 21,000 on Wednesday, March 1. These gains come at a time when market volatility has also been on the decline. In early February the CBOE Volatility Index – more commonly known as the “investor fear index” – showed investor concerns on the decline.

However, even as the market goes up many people still worry about their investments. What will the market do next? Do they own too many stocks? When the market goes down, will it be just be a spill, a correction, or a crash? For that matter, do they have too much money in other risky, market-based investments?

For people close to retirement, this brings up an important question. Should you stay with your current portfolio allocation mix, or is it time to move into a safer strategy?

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Chances are you know the concept of asset allocation. As Forbes contributor Mitch Tuchman puts it, asset allocation is the “collection of investments you own,” depending on your risk tolerance and your desire for potential investment returns. In the investing world, it is a strategy of apportioning assets to achieve a strategic balance of potential risks and returns that is right for an individual investor.

What Does That Have to Do with Retirement Planning?

That’s all good and fun, you may say – but what does that have to do with retirement planning?

Well, from a planning standpoint, plenty. It is the same question of deciding how to allocate a retirement portfolio.

But in this case, decisions revolve around striking a balance between managing potential risks and achieving desired retirement outcomes, like income certainty, wealth protection, or other goals. In financial lexicon, this strategy is known as “diversification.” When it comes to retirement planning, diversification is arguably an essential part of a successful retirement strategy. But why?

DOL rule updates blog post

Having been created by the Obama administration, the DOL fiduciary rule would bring wide, sweeping changes to the financial services industry. But as we noted in prior articles, a Trump administration could make this a different story. There was potential for the rule to be delayed past its April 10, 2017 “applicability date,” to undergo changes, or to even be abolished.

Since we first published on the DOL rule and its possible effects, there have been developments. Now the Trump administration has directed the Department of Labor to conduct an analysis of whether the rule could have any harmful effects, especially on retirement investors. That could potentially put the fiduciary regulations at jeopardy, depending on the department’s findings.

Because it is important to know how these news events may affect your future, let’s cover them in detail. Without further ado, here is a timeline of recent news updates, and how they may affect the outlook of the ruling.

what might a fiduciary recommendation look like

With its impending rollout in April, the DOL fiduciary rule will treat nearly all financial professionals as “fiduciaries.” As you can imagine, this has brought industry-wide changes in financial services. All types of financial companies, from stock brokerage firms and asset management companies to investment advisory organizations and insurance carriers, have been preparing for compliance. Of course, it also means change for you and other Americans, whether retired or not quite there yet.

If you have worked with a financial professional for investment decisions, you may have heard of a “fiduciary standard.” It is where an advisor holds legal and ethical obligations to provide investment advice in your best interest. In other words, the advisor serves as an impartial, independent guide. He or she is there to help you to make appropriate decisions for your financial future.

Prior to the DOL ruling, financial professionals considered fiduciaries were those paid for advice on an hourly rate or paid a percentage fee based on account holdings. Many Americans are familiar with the concept of a best-interest recommendation from those settings. But with rule’s expansion, recommendations in exchange for other forms of payment, including commissions, will fall under greater scrutiny.

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Retirement planning involves several decisions. For many retirement savers, an important question is what to do with their 401(k) retirement account. As they near retirement, investors must decide whether to leave the money within their account or choose another option, such as an IRA rollover.

The good news is Americans typically have six options for moving 401(k) assets around or leaving them alone. But not all of these possibilities may be appropriate, depending on the merits and downsides of a particular rollover option for your personal situation. It’s also not unusual for an investor to have the lion’s share, or even a large bulk, of their retirement assets in a 401(k) plan account. So, whatever they do with these retirement savings, it’s a decision that will have tremendous implications for the future.

If you are mulling over 401(k) rollover options, be sure whoever you work with understands all the ins-and-outs of different rollover outcomes. Your financial professional should clearly explain the positives, negatives, and details of each rollover option to you, and go over how it may help or hurt your personal situation. After all, this is your future at stake – one mistake can be costly, and once made, some 401(k) rollover errors are irreversible. Make sure you choose wisely and you are well-informed of each possibility before you decide.

In the meantime, if the question of “what are my 401(k) rollover options?” is a pressing matter for you, here’s a quick post which goes over some important factors to consider. Read on for some 401(k) rollover basics to start with making an informed decision. And as we emphasized before, make sure to work with a qualified professional for any 401(k) rollover considerations.

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The holiday festivities are coming around, and many Americans are getting their financial houses in order. For people who are retired or near the end of their working life, that includes assuring their retirement needs and objectives can be met.

If you and your partner are within five to ten years of retirement, or are already retired, now is a crucial point. It makes sense to prepare for this stage of life. Working with a financial professional can help clear a path to a secure future and instill greater confidence in our financial decisions. But the sheer numbers of financial professionals from whom you can obtain retirement planning advice is truly staggering.

Consider this:

To say the least, choosing a well-suited financial professional for retirement planning guidance can be a challenging task. Let’s cover a few basics to keep in mind as you search for a suitable professional for retirement planning advice.

donald trump retirement issues blog photo

Photo credit: Donald Trump as he exits the stage after speaking at CPAC '11. By Mark3tel (2011) https://flickr.com/photos/n3tel/5434963575 Attribution (http://creativecommons.org/licenses/by/2.0/). Photo attribution by PhotosforWork.com.

This presidential election has brought lots of fireworks. Many Americans worry about the future and what it means for their money. Is a comfortable future – a financial life without anxiety and recurring headaches – really within reach?

President-elect Donald Trump isn’t completely clear in all of his policy stances. From an investor standpoint, it injects uncertainty in the future. How financial markets will react to a Trump administration’s policies is anyone’s guess – and for Americans approaching retirement, it is an especially important question.

If you plan to start drawing on your nest egg within the next eight years, do not fret. Here’s a quick look at some of the takeaways from this election – and how you can keep your money safe, spend with confidence, and enjoy the retirement you have worked hard for.

How can the 2016 Election Affect Your Retirement

Given the effects of Brexit last week, it’s worth considering how the upcoming U.S. election might impact your retirement. From market volatility to public policy changes, a number of factors can be influential. Let’s look at a few possibilities in detail.

Market Volatility Tied to Uncertainty

Elections bring uncertainty, which is conducive to market volatility. Analysis from Merrill Lynch Global Research reports the S&P 500 index has declined an average of 2.8% since 1928 in elections years like 2016. In other words, it’s when the incumbent president isn’t seeking reelection.

On the other hand, data shows the S&P 500 has gone up in 13 of the 16 election years since World War II. Market analysts say this election year isn’t likely to differ too much from prior election seasons. However, elections do heighten people’s emotions, and both the Republican and Democratic presidential presumptive nominees have been getting record unfavorable ratings.

People with equities in their retirement portfolios, or who rely upon stock market earnings for retirement income, may experience some ups-and-downs.

Blog common financial risks in retirement

When it comes to lifestyle, it can be said that we have “two” lives – or rather two different life phases. The first phase is the working years, or when we work for a living. The second phase is retirement, or when we can choose to stop working, should we desire to, and do what we want. From volunteering or spending time with family to social gatherings, vacation getaways, gourmet dining, or personal luxuries, there’s no shortage of ways we can enjoy our time in retirement.

However, many Americans who are retired or nearing retirement face unique barriers – financial challenges which can keep them from enjoying the lifestyle they worked hard for. Preparation is key, so the importance of planning ahead can’t be overemphasized. Here’s a quick look at some common financial challenges to account for.

Retirement Trends for Baby Boomers

Surveys confirm Americans will face a number of retirement issues. It’s optimal to plan ahead so you can account for these benchmarks. But what about if you’re already retired – or what if retirement is just around the corner?

According to Pew Research, each day 10,000 additional baby boomers turn 65 years old. Since this trend is set to persist over a 19-year period, it’s certainly one that’s been redefining retirement. In fact, baby boomers will face many unique trends in their retirement years.

Let’s cover some of these trends below.

Pressing Boomer Retirement Trends

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In the past, we’ve discussed what retirement expectations are today – such as what Americans consider to be an ideal retirement. But on the other hand, this is balanced by recurring fears about retirement security. For one, many Americans worry about whether they will have enough retirement funds to live comfortably.

Then there is the issue of unrealistic expectations. A growing body of data shows Americans believe they’re more ready for retirement than they actually are. A recent study by the Transamerica Center for Retirement Studies showcased this trend. The study surveyed 4,000+ workers aged 50 and 2,000+ recent retirees, and then compared the workers’ responses with the retirees’ recent experiences in retirement.

What Does the Study Say about Retirement Expectations?

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In a prior blog post, we discussed common myths about post-retirement employment. As covered, many Americans believe they’ll be able to cover any shortfall in retirement funds by continuing to work. But this expectation may be disrupted by health issues or other unanticipated life changes.

Like expectations about working longer, there are some common misnomers about risk management in retirement, as well. “Risk management” refers to the amount of risk someone tolerates in their financial portfolio – or the potential for their investments to experience a setback. It shows the flip-side of retirement planning: Having a plan in place is optimal, but it’s important to be prepared for making readjustments, as well.

Let’s consider some prevailing myths about risk management in retirement planning – and how you can avoid these downsides in your own efforts.

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In the past, we’ve covered some of the financial challenges seniors are likely to face in retirement. In turn, these hassles have played a role in shaping Americans’ retirement expectations. One of the growing trends is post-retirement employment.


At present, many people have a shortfall in retirement funds. For instance, the Boston College Center for Retirement Research found many Americans were greatly underprepared. According to the center’s data, as of 2013 half of American households didn’t have enough money to sustain their current standard of living in retirement.

Despite this challenge, many Americans believe working longer will help cover the shortfall. This belief is increasingly giving way to a new expectation: that post-retirement employment in itself is enough to make up for not having a retirement plan. But the truth is many factors can unbalance this approach and lead to unnecessary financial hardship.

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In a prior blog, we’ve covered what a dream retirement lifestyle may look like. Other discussions have centered on the importance of planning for retirement or the array of retirement vehicles available. But what about the process of retirement planning itself?

Retirement planning isn’t limited to just people and their advisors. When someone reaches retirement age, support networks become important. Responsibilities shift. Family members are actively involved in their parents’ caretaking. Or they may take on the role of caretaker for their parents.

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We've already covered how the retirement landscape in America is changing. One contributing factor is the changes being made to defined-benefit pension plans. In the private sector, defined-benefit pensions simply are disappearing. According to Towers Watson, over the last 15 years there has been a big decline in the number of largest American companies offering new hires defined-benefit pensions. That percentage took a 36-point nosedive from 60 to 24 percent.

Whats the Future of Social Security

What does the future of Social Security look like? It’s an important question, as Social Security benefits are a large source of retirement income for many Americans. According to the Social Security Administration, 52% of Americans aged 65 and older rely on Social Security for at least half of their retirement income.

One challenge facing Social Security is the question of solvency. To discuss this point, it’s important to note there are actually two trust funds for the program: the Old Age and Survivor Insurance trust fund for retirement benefits, and the Disability Insurance fund for disability-related benefits.

To reinforce, we believe that the baby boomer generation may be able to count on Social Security, but it’s important to know what may be in store. With that said, here’s a review of some outlooks on Social Security’s future.

slider safe money retirement planning

Chances are you have heard of “safe money” at some point. From financial talk shows and radio commercials to television broadcasts and retirement seminars, it’s a concept that is all over the place. “Safe money” is commonly defined as the money you can’t afford to lose.

But for those of us approaching retirement, what does that mean in real-world terms? Many advisors explain safe money in investment terms. For example, it could mean discussion of “safe money investments,” or vehicles with less exposure to market volatility.

A downside with this approach is its investment planning focus. We have discussed how retirement planning should emphasize monthly income over asset values in its goal-setting. After all, retirement is a life stage in which we draw on a nest egg and other income sources for income – wealth we have accumulated over many years for this timespan. So, when discussing “safe money” in retirement, we shouldn’t frame it in terms of only the possibility of money losing value.

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