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investment fundamentals quiz foster group

You’ve used evidenced-based investing for your assets, you’ve maximized cash flow and minimized taxes, you’ve taken steps to protect the wealth you’ve accumulated, and you’ve put together a plan for your estate that includes a will, a power of attorney and a health care proxy. If you’ve planned well by doing all this, retirement should be a chance for you to sit back and relax.

Here are five final considerations in planning for the ideal retirement:

1) Figure Out the Cost of Retirement, Starting from the Right Perspective

Retirement is a long-distance haul, and it requires strategy. Planning for a long period of time can be daunting, but the best place to begin is by considering your individual needs.

Begin by asking these questions: What do I want out of retirement? What are the passions or hobbies I would like to pursue? How much will that cost?

Once you have a figure, compare this to the anticipated size of your portfolio and other income sources. Understanding your withdrawal needs, making allowance for future inflation and market volatility, and employing a tax-efficient distribution strategy are all critical.

You also need to understand how your retirement savings will be taxed: With a 401(k) and IRA, you can potentially deduct your yearly contributions from state and federal taxes, but future withdrawals are taxed at ordinary income tax rates. A Roth IRA doesn’t allow you a current tax break on contributions, but your withdrawals and earnings are generally tax-free.

If the amount you’ll need is greater than the amount you expect to have accumulated when you retire, you don’t necessarily have to cut back: You will, however, have to save to make up the difference.

download-ad2) Decide When You Want to Claim Your Social Security Benefits

When it comes to Social Security benefits, it’s smart to wait.

The earliest you can claim Social Security benefits is at age 62, but the amount will be reduced because you’ve filed a claim before your Social Security “full retirement age.” On the other hand, if you wait until you’re 70, you could raise your benefit check by as much as 76 percent. Waiting to claim your benefits certainly helps alleviate the risk of running out of money in retirement.

3) Know How Your Distribution Strategy Will Affect You (And the Role Inflation Will Play)

As you prepare to withdraw from your assets, you should keep a few things in mind: Typically, withdraw first from assets that are taxed the least — cash — followed by fixed income and tax-deferred accounts. Studies have shown that a sustainable annual withdrawal rate is somewhere in the range of four percent of your retirement portfolio.

However, inflation plays a major role in the purchasing power of your dollars. Depending on where you concentrate your purchases, that power may erode at varying speeds. Because of market fluctuations, it is imperative that you are flexible with your spending. You need to work closely with your advisor and accountant to best manage your distributions.

4) Consider the Cost of Your Health

A study recently projected lifetime health care expenses for a 65-year-old couple at $275,035 for men and $294,975 for women.

And this projection was just an average. It didn’t account for an emergency, which could mean you and your partner would have to save more than $600,000 in lifetime health care expenses alone.

At 65, you’ll likely be using Medicare for health insurance, so it’s important, as you plan for retirement, that you determine how much Medicare will actually help you. There is no monthly premium for Part A of Medicare (which covers hospital visits and hospice care) for anyone 65 years or older if they are a U.S. citizen or if they’ve been a legal resident for five years. However, costs for Part B of Medicare (which covers doctors and tests) are based on a sliding scale according to income.

5) Have A Plan That You Can Stick to No Matter How Unpredictable Life

As a physician, you know firsthand that life is unpredictable. Chances are, you will have to adjust your plans at some point down the line. But when you start from the right place, you should be able to end where you want. If you develop a plan that anticipates what you’d like out of retirement, and if you stick to those goals, you should be able to achieve your retirement dreams.

When it comes to retirement, the most important thing to keep in mind is to plan. Retirement can be daunting, but if you have a well-thought-out strategy and stick with it — a plan that factors in when you want to claim Social Security, how you want to adjust for inflation, and how you expect to cover health care costs — peace of mind is possible.

Conclusion

Financial planning should always begin with your life. When you invest, your portfolio should reflect your life, not whatever is going on in the market. Your finances should consider the big picture and weigh long-term impacts.

At Foster Group, our team has developed a culture of evidence-based investing. We specialize in holistic financial planning and can help you in paying off debt, accelerating savings, and writing off tax-deductible expenses. Not only can we increase your probability of success, we can help you protect your wealth and ensure you have an appropriate amount of insurance coverage. We will have your best interests in mind during the implementation and monitoring of your estate and retirement plans.

If you have any questions, contact an advisor at Foster Group.

PLEASE NOTE LIMITATIONS: Please see Important Advertising Disclosure Information and the limitations of any ranking/recognitions, at www.fostergrp.com/disclosures. A copy of our current written disclosure statement as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov.


PLEASE NOTE LIMITATIONS: Please see Important Disclosure Information and the limitations of any ranking/recognitions, at www.fostergrp.com/info-disclosure/. A copy of our current written disclosure statement as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov.