​Very often, a retirement plan is only as good as the assumptions in the plan. You’ve likely made assumptions about your retirement income, your life expectancy and maybe even your need for medical care. One big assumption in many retirement plans is the amount of money you’ll spend each year after you retire.
It’s a common assumption among many workers and even financial professionals that spending goes down after you stop working. This assumption is often used when calculating a retirement savings target.
However, it’s not always true that spending goes down after you retire. Many retirees find their spending is much higher than they’d anticipated. Sometimes their spending even increases after they stop working.
When you determine your retirement savings goals, it might be a mistake to underestimate your projected spending. There are many reasons spending may increase in retirement, and it’s important to take these factors into account ahead of time.
Below are a few common reasons spending can increase in retirement:

Medical Expenses
 
For most, retirement brings a transition from employer-sponsored health insurance to Medicare. This transition can often be surprising for new retirees, especially those who had a robust employer plan. While Medicare is a valuable resource, it doesn’t cover everything.
Fidelity estimates that the average retired couple will spend $260,000 on out-of-pocket medical costs.1 Those expenses include such things as premiums, deductibles, copays and certain health care services like dental and vision, which aren’t covered at all under Medicare. Even for the services that are covered, Medicare usually pays only a portion of the cost. That means you may have to pay the balance out of pocket.
You can prepare for these expenses ahead of time by contributing to a health savings account, which can help you build up a tax-advantaged reserve to help cover your health care costs in retirement. You may also want to consider a range of supplemental insurance policies to help fill the gaps in Medicare coverage.

Taxes
 
Your taxes may not necessarily increase in retirement, but you could feel their impact much more acutely. While you’re working, your taxes are likely withheld from your paycheck, so you may be less aware of their true cost.
During retirement, though, your taxes will come out of your Social Security, pension payments, retirement account distributions and other income sources. It’s important to be aware that you’ll have to pay taxes on much of your retirement income. Also, keep in mind that distributions from 401(k) and traditional IRAs are usually taxable. By planning ahead, you can ensure you’ll take these expenses into account and budget accordingly.

Increased Spending

Although you may not expect it, it’s common for retirees to see their discretionary spending increase in retirement. The combination of more free time and a substantial amount of readily available money can often lead to increased spending.
Many retirees fill their newfound free time with travel, shopping, dining out and other activities that cost money. There’s nothing wrong with having fun, of course, but it’s important to be aware of your spending so that it doesn’t jeopardize your financial security in the later years of retirement. Preparing a budget that accounts for your projected income and expenses in retirement can help guide your spending decisions and ensure your spending remains within a reasonable limit.
 
Ready to develop your retirement spending plan? Let’s talk about it. Contact us at Capital Management Group to learn more. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 

1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
17749 – 2018/6/19

​If you’re nearing retirement, you likely have some big decisions ahead of you. Among those is what to do with your 401(k) plan. Given that your 401(k) may be one of your largest retirement assets, it’s important that you consider all your options. Your retirement could last decades. The decisions you make today regarding your 401(k) could determine whether those funds last through your lifetime.
 
You have a few options available for your 401(k) after you retire. Each has its own set of advantages and considerations. Below are three of the most commonly used 401(k) strategies for retirees:

Take a lump sum.
 
One option is to simply cash out and take all your 401(k) funds in one payment. This option has the advantage of giving you a large amount of money and the freedom to do whatever you want to do with it. Going this route does come with some significant drawbacks, however.
 
First, the distribution is fully taxable. And since it’s more than likely a large sum, it may put you in a higher tax bracket, forcing you to pay more than you otherwise would. On top of that, if you’re under age 59½, you’ll have to pay an early distribution penalty.
 
Another disadvantage of taking a lump-sum payment is that you’ll lose out on future tax-deferred growth that you otherwise would have received if you’d left the money in the plan. Remember, you may need your funds to last for decades. You will likely need some growth to make that happen. Tax deferral can boost your growth and help you sustain a healthy account balance.

Keep it where it is.
 
There’s nothing that says you have to do anything with your 401(k) plan after you retire. You could simply keep it in your employer’s plan. This may be the simplest option. Since you know and understand how the plan works, you may feel more comfortable keeping your money there. You also might like the investment options the plan offers. Keeping the funds in your employer’s plan also lets you avoid taxable distributions or early distribution penalties.
 
Leaving your money in your employer’s plan, however, could limit your options. You will only have access to the investment options in the plan. It’s possible that those options may not align with your risk tolerance in retirement.
 
Also, if you have other investment accounts like IRAs, it could become difficult to manage them all. It can often be difficult to implement a cohesive, unified strategy across multiple accounts. What’s more, having a 401(k) in addition to other retirement accounts leaves one more account for your beneficiaries to track down after you pass away. That gives them another task and step of complexity during an already challenging time.

Roll it into an IRA.
 
Another option is to roll your 401(k) plan into an IRA. By doing this, you can avoid a taxable distribution or early distribution penalties. The funds in your new IRA will also grow tax-deferred just like they did in your 401(k). One of the biggest benefits of taking this option is that you can gain more freedom as to where you can invest your money. This can be a good option if you are looking for similar benefits but want more control of your retirement funds.

Searching for a retirement planning strategy to fit your needs? Let’s start the conversation. Give us a call to discuss your goals with a financial planning professional today.
 

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
16295 - 2016/12/19

​Is retirement quickly approaching? Are you currently exploring tools and products that can help you enjoy a financially stable and comfortable retirement? From IRAs to insurance to investment vehicles, you have a broad range of tools and products at your disposal.
 
An annuity is one such tool. Annuities are often used to generate income, minimize taxes, manage risk and more. There are several types of annuities, and each is used to achieve specific objectives.
 
One increasingly popular type is a fixed indexed annuity. These annuities are unique in the way they offer growth potential while also limiting downside risk. Fixed indexed annuities can also be used to create a guaranteed* lifetime income stream. Below are a few common questions and answers about how to use a fixed indexed annuity to protect your financial stability in retirement:

Can your assets grow in a fixed indexed annuity?
 
A fixed indexed annuity is a deferred annuity, which means your funds inside the annuity have an opportunity to grow and accumulate before the contract is annuitized and converted into income. Deferred annuities are categorized based on the way the funds accumulate. There are fixed annuities, which pay interest, and variable annuities, in which growth comes from market returns. Variable annuities often have downside market risk.
Fixed indexed annuities offer the safety of a fixed annuity with some potential for growth. Your growth comes from interest payments. However, your interest rate is based on the performance of a market index. If the market performs well, you may receive more interest. If it performs poorly, your interest rate could be lower.
In most fixed indexed annuities, you don’t have downside market risk. Even if the index has a negative return, you won’t lose money. That’s because most fixed indexed annuities have what’s called a guaranteed* minimum interest rate, which is the least amount of interest you can receive in any given period. In this way, a fixed indexed annuity can often serve as a protective tool against loss.

What fees will you pay in a fixed indexed annuity?
 
Annuities are often perceived as high-cost financial tools. However, the cost of an annuity often depends on the specifics of the contract. Some annuities come with significant fees, while others may have minimal expenses.
Most annuities do have something called surrender charges. These are penalties you pay if you surrender your contract or take a sizable withdrawal during a specified surrender period, usually the first few years after you open the policy. However, you only pay the surrender penalty in those instances.
Fixed annuities often have minimal fees or none at all. Some policies offer optional benefits and features that may provide greater protection but also come with increased cost. Make sure you understand the costs of your contract before moving forward.

Can I take income from my fixed indexed annuity?
 
There are a few different ways to take income from a fixed indexed annuity. One is to annuitize the contract. When you annuitize a policy, its value is converted into an income stream that’s guaranteed* by the insurance company. The amount of income is based on the value, your age and other factors.
Another option is to take systematic withdrawals. This may be preferable to annuitization, because withdrawals don’t require you to sacrifice your contract value. Some policies even have additional options that guarantee* your withdrawals for the rest of your life.

Ready to learn more about whether a fixed indexed annuity is right for you? Let’s talk about it. Contact us today at Barry Levie Financial. We can help you analyze your needs and identify the right strategies. Let’s connect soon and start the conversation.
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
17749 – 2018/6/19