8 Retirement Challenges That You Didn’t Have While Working

By Modern Wealth Management

October 27, 2022

8 Retirement Challenges That You Didn’t Have While Working

Key Points – 8 Retirement Challenges That You Didn’t Have While Working

  • It’s Never Too Early to Start Planning
  • Your First Challenge Is Identifying Your Retirement Identify, and Then You Go from There
  • Working with Financial Professionals That Put Your Interests First
  • Many of These Retirement Challenges Are Intertwined with Each Other
  • 23 Minutes to Read | 38 Minutes to Listen

Planning for a fulfilling retirement isn’t something that can be done in a blink of an eye. It takes time and a lot of preparation to overcome a lot of retirement challenges that many people don’t even think about. Bud Kasper and Logan DeGraeve review those retirement challenges and encourage you to start building your financial plan sooner rather than later.

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Show Resources:

Find links to the resources Bud and Logan mentioned on this episode below.

Logan DeGraeve Returns to America’s Wealth Management Show

Bud Kasper: Hello everyone and welcome to America’s Wealth Management Show. I’m Bud Kasper. Dean Barber isn’t with us today. He is on a family outing, but he’ll be back with us next week. Logan DeGraeve is filling in for Dean. You should recognize him because he fills in quite often when Dean or myself is away. Thanks for being here, Logan.

Logan DeGraeve: No problem, Bud.

A Quick Rundown of the 8 Retirement Challenges

Bud Kasper: We’ve got a great show for you today because we’re tackling some issues specific to retirement. In fact, we’ve titled this show, 8 Retirement Challenges That You Didn’t Have While Working. I wish I had some drum roll or something, but I think you’re going to find it interesting because there are some very important points that people need to understand as they’re preparing for retirement or already in retirement. We’re going to take a deep dive into each point, but here are those eight retirement challenges.

  1. Knowing What to Do Day to Day – Finding a Retirement Identity
  2. Income Sources Change, No More Paycheck
  3. Finding Trustworthy Professionals
  4. Maximize Your Social Security
  5. Changes in Taxes, and Potential Higher Tax Brackets
  6. Managing Investment Risk to Achieve Retirement Goals Instead of Only Saving
  7. Health Care, Medicare, and the Costs of Aging
  8. Planning Your Legacy, Estate Planning

1. Knowing What to Do Day to Day – Finding a Retirement Identity

Logan, let’s go ahead and get started with the first of the eight retirement challenges. That’s knowing what to do day to day and finding a retirement identity. Finding out your retirement path is sometimes a very critical change of life.

Logan DeGraeve: It absolutely is. When you think about that, you need to start prior to retirement. Because when you retire, you say, “Well, I’m going to find out what I’m going to do in retirement” But by then, it’s too late.

That’s why we sit down with someone five to 10 years from retirement and ask them those questions to find their retirement identity. They may not know exactly what’s going to happen because life happens. Grandkids come, maybe they want to move, things like that. When we’re working, our job is oftentimes one of our main identities. Being a CERTIFIED FINANCIAL PLANNER™ Professional is one of Bud’s most important duties outside being a husband, father, etc.

Bud Kasper: And chief bottle washer.

Every Day Is a Saturday in Retirement

Logan DeGraeve: It happens all the time that people are not happy when they’re stepping into retirement because they haven’t determined their retirement identity yet. You need to have those conversations to determine what every day is going to look like. Every day is a Saturday in retirement.

Bud Kasper: That’s right. I think that’s a great point, Logan. You need to have a discussion with a CERTIFIED FINANCIAL PLANNER™ Professional to lay out the plan—the roadmap—that’s going to guide you, especially in the early stages of retirement. It’s critical to get on the right path rather than the wrong path and needing to have a course correction later.

Achieving Financial Freedom

The anticipation is so exciting for people who have worked their entire life. When they’re retiring, they’re finally at that point where they’re going to have the liberty to do the things that they want to do with their family, their spouse, or whatever the case may be. But in my 38 years in the financial industry, I’ve witnessed too many people going into retirement blind.

They’ve saved money in their 401(k) and some outside savings as well. They’re not sure if they’re eligible for Social Security and how that integrates into the process. As a CFP® Professional, Logan, give us some of your experiences with people that are entering into retirement.

2. Income Sources Change, No More Paycheck

Logan DeGraeve: The question that I get the most is, “Where’s my income going to come from?” It’s usually the first question people ask, and it’s second on our list of retirement challenges. There’s a lot of anxiety and angst about that. People are used to getting a paycheck, but now they’re looking for other sources of income in retirement. So, that would include a 401(k), Social Security, or maybe a pension, etc. Our job is to figure out how to maximize that stuff and get you the most tax efficient paycheck.

When people start this process early, it really helps because the angst and anxiety can be relieved. They’ll already know where their income is coming from for the next year or the first year of retirement. And when there’s a lot of market volatility like there has been this year, it also creates a lot less pressure because they’ve prepared for this. The money they’re going to spend today and tomorrow has not been subject to the 20%, 25% swings in the volatile market that we’re seeing right now.

3. Finding Trustworthy Professionals

Bud Kasper: Sure. And one of the ways you can do that is by working with financial professionals to help build your financial plan. In addition to having the opportunity to meet with our CFP® professionals, you can also use our financial planning tool from the comfort of your own home at no cost or obligation.

Logan DeGraeve: Meeting with a CFP® professional is no different than getting your yearly physical. It’s just a check on your financial health. You may think everything is great, but let’s make sure that when we get down to the nuts and bolts that things are in line with where you think they need to be.

Time Is Our Most Precious Commodity

Also, make sure you’re not robbing yourself of the most precious commodity we all have, which is time. What I mean by that is that you may have saved enough to retire earlier than you think. I see it all the time. So many people think that they need to wait until 65 because that’s Medicare age or 66 ½ if that’s their full retirement age with Social Security. Those are arbitrary numbers. That’s not when you need to retire. 

A Year in Review

Bud Kasper: Exactly. One of the other things, though, is that it’s been a sobering market and sobering experience, especially over the last few months as everyone has had the challenges associated with inflation and what we’ve been seeing from the Federal Reserve. In a way, that can be a good thing if that wakes people up to realize that retirement is something they need to plan for.

Logan DeGraeve: Absolutely. If you think about it, a lot of all-time highs and accounts were hit about mid-November of last year. We’re looking at almost a full year of just continued drawdown. Yes, we’ve had some bumps up in there, but it’s really tested people’s patience. We haven’t seen an extended drawdown like this in a while.

A Team of Professionals That’s Working for You

Bud Kasper: That’s right. That’s where the integration of professionals such as CFP® professionals, CPAs, estate planning attorneys, etc. is so important. The knowledge base of those professionals allows you to have a reassurance that you’re doing the right thing for yourself and your family.

Logan DeGraeve: And if you don’t have a financial plan, how do you know how what’s going on in the market is impacting your probability of long-term success? You don’t.

Bud Kasper: When we talk about these things that we feel so strongly about and look at the critical aspects of trying to find success out of planning for the individuals that are wanting to learn something or wanting to become clients of our firm, that’s one of the reasons we allow people to use our financial planning tool at no cost or obligation. Then, if you choose to meet with us, we will already have some cursory information that allows us to have something to start talking to you about so we can really get to the essence of it. And that is, how do you plan for retirement?

Logan DeGraeve: Bud, that’s a great point. A lot of people say that they don’t want to give information. Bud and I have sat in so many first meetings and explained that we’re CERTIFIED FINANCIAL PLANNER™ Professionals. We need to know a lot about you before we know if we can even help someone out with anything. I think that’s kind of the misconception. We’re not selling anything. But if we don’t know anything about someone, how do we know what we can do to possibly help them?

We’re Happy to Start a Conversation with Anyone About Their Retirement

Bud Kasper: I had a crazy experience that happened just a couple weeks ago. A gentleman just came off the street and said, “I just had an impulse to come in and have a conversation to find out a little about your firm.” We have other businesses in the complex that we work in, so it just so happened that he was walking by and saw our office.

He’s had a relationship for a long time with another advisor, but just wanted to have a conversation with us. He said, “Do you have a minute? Can I talk to you?” And I said, “Sure, let’s sit down and talk.” He explained what he’s been through, what he’s trying to accomplish, and everything else.

After that, I have a few questions for him. I asked him if we went through his Medicare processes to understand where that is. He hadn’t done that or know how to do it. Then, I asked if he had looked at his income stream and if he knew how to plan around that with the resources that you have. He had never been asked those questions to think about all that.

We’ve been doing this for a long time and know that people are coming in with more questions than answers. That’s because they haven’t been working with financial professionals or they’ve been working with financial salespeople who aren’t looking out for the client’s best interests.

Anybody can call themselves a planner, but only a CERTIFIED FINANCIAL PLANNER™ Professional has the educational background to give you critical information and a path to success in retirement.

Seeing the Big Picture of Your Retirement

Logan DeGraeve: That’s a great point. You need to make sure you’re finding trustworthy people to work with. And I’m not just talking about the CERTIFIED FINANCIAL PLANNER™ Professional. Like Bud said, we also have Bud, what do we also have CPAs, estate planning attorneys, and insurance experts.

Medicare is complicated. It changes and you need to have someone that’s familiar with the situation. What Bud was referencing earlier can oftentimes be an investment advisor. We often see this for people that are in that accumulation phase of life. Those people are in their 30s, 40s, and maybe early 50s. They have a goal but know that the hardest part is saving.

What we focus on is the distribution phase of life. We have this stuff. Now, how do we get it to work for you? When we’re talking about our CPAs, we’re not necessarily talking about tax compliance, which is tax preparation. We’re talking about forward-looking tax planning. How do we put you in a better situation, not only for maybe this year, but three to five years or 10 years down the way? I think that’s very important.

Getting the Best Net Result

Bud Kasper: I want to go back to the story about the gentleman who walked into our office to ask some questions asked. When we got to the discussion about taxation and the impact on his portfolio, he said he’d never looked at anything like that. I pointed out that that’s the net result.

Even though Logan and I have a tax background, we’re not going to pretend to be the CPA with the expertise they have. That’s why it was necessary from Dean’s perspective to integrate those other professionals that can get the best result to the people that are counting on us for that.

What Can Happen When a CFP® Professional and CPA Work Together

Logan DeGraeve: I have a quick story about how important tax planning is as well. I was working on a case this week with our Director of Tax, Corey Hulstein, who is one of our in-house CPAs. The clients we were talking to are basically living off a taxable account. There are a lot of long-term capital gains in there. So, we were having some issues getting some cost-effective Roth conversions.

We were looking at effective rates and what we came up with was that it doesn’t need to be just one tax planning strategy or doing it all in one year. We decided to raise cash for them to live off in one year. And then the next year, we’d look at doing Roth conversions when we don’t have a lot of capital gains. There is no way someone can figure that out themselves. That’s why it’s so important to work with a CPA and a CFP® Professional.

Bud Kasper: I want to go to another topic that’s related to our planning, and that is longevity. With longevity, I’m talking about life. It used to be that people say that they’d retire at 65, die at 75, and that was just the way the averages worked out. That’s not the case today because more people are living into their 80s and 90s.

The Average Life Expectancy Continues to Rise

When we go through a plan, we’re usually setting life expectancy at 92 for the man and 94 for the woman. We know that the probability of that is not great, but It has been increasing over the years.

Logan DeGraeve: It will continue to.

Bud Kasper: But my point with this was the word longevity because your money, your assets need to live that long. If you pass away prior to those two ages, so be it. You were at least successful up to the time of your passing. But we need to think past that because the surviving spouse that needs the considerations.

Logan DeGraeve: That’s a great point. We hope that each spouse lives into their 90s and they live long, healthy lives. But that’s not reality sometimes. We’ve unfortunately seen it so many times that maybe one spouse passes at 82, the other lives to 90. That’s eight years as a single tax filer. And that completely changes things. 

4. Maximize Your Social Security

When we’re stress testing financial plans, what does this also lead into? When and how should you take Social Security, especially for the higher earner. Maximizing Social Security is next on our list of retirement challenges. In that same scenario, if one spouse passes, only the highest benefit stays. It’s not always just about you when you’re looking at stress testing. Is your spouse going to be OK?

Your Social Security Could Be Taxable

Bud Kasper: And how many times have you brought up the Social Security element of the plan and someone says, “You mean my Social Security is taxable?” Well, it could be taxable. What are the parameters? Oftentimes, they don’t know.

Let us help show you that. The income factor associated with financial planning and how much you take in any given year is going to impact the net result from a taxing position. When people see the reality of that, that’s a great thing to be able to understand. They might end up saving some substantial money.

Logan DeGraeve: A lot of times what happens is people have been in retirement, maybe they’re living off a pension, Social Security, and that Social Security is not fully taxable. But when April 1 of the year after you turn 72 hits, Required Minimum Distributions come into play. You add income and it’s possible that Social Security is up to 85% taxable.

Tax Planning Needs to Be Specific to You

That’s when we start looking at these things, but it’s so preventable if you start planning early. Bud, how many times have you set across the desk from someone and told them that we’re going to speed up their income this year. And because of that, they’re going to owe Uncle Sam $15,000. And they’ll say, “Bud, have you lost your mind?” But when you start getting down to the long-term impact of it and the success, it’s incredible. Investments are very commoditized. But what’s not? Tax planning.

Bud Kasper: Because it must be specific to you. Logan made the statement earlier about a surviving spouse. After one spouse passes, the surviving spouse becomes a single filer. That means they’re going to be in a higher tax bracket. You need to understand that.

Good News Regarding Next Year’s Social Security Checks

Staying on the topic of Social Security, I want to discuss what it’s going to look like as we go over into the new year.

Logan DeGraeve: I think a lot of people are going to be happy with their Social Security paychecks next year.

Bud Kasper: They probably will be because we’re getting an increase. We’ll detail those increases in just a moment. But I think the other part of it is that with getting more money, how much is Uncle Sam going to take away from that? And how is that going to impact your Medicare premiums?

October Is National Financial Planning Month

You might ask, “Why do I have to worry about that?” Because that that’s part of it. If you don’t have all these other factors that are integrated into your knowledge base, remember what this is. Dean, Matt Kasper, and I highlighted a few weeks ago that this is financial planning month.

Logan DeGraeve: The other CFP® professionals and I just spent a lot of time writing some articles for financial planning month just making sure we’re educating people. Drew Jones started off the series with an article titled, Retirement Analysis: Current vs. Proposed Plan. Mine is titled, Understanding Your Tax Allocation. And then Will Doty wrapped up the series with his article, Reading Your Balance Sheet and Income Statement. 

Bud Kasper: Being a CFP® Professional yourself, you understand the importance of the work that we do that helps people have a successful and happy retirement.

Logan DeGraeve: At bare minimum, everyone needs to be doing financial planning.

There’s So Much More to Financial Planning Than Your Investments

Bud Kasper: They should be. But people need to be educated on how to do it. For example, the person who came in off the street to have a conversation with me had a sizable amount of money and was a smart guy, but there was a lot he wasn’t aware of about financial planning. He didn’t have the exposure to it and thought everything revolved around investment returns. He hadn’t been looking at the impact that things were having with his Social Security and taxation. 

Logan DeGraeve: More often than not, people just don’t know what they don’t know. That’s the reality of it. Think about how many times are you at a social gathering and you tell someone that you’re CFP® Professional. How often is the first question you get asked, “What stock should I buy?”

Back to That Nice COLA Increase That We Alluded to

Bud Kasper: Yeah. That’s a fair statement. It really is. Well, let’s talk a little bit more about Social Security because recipients are going to receive a nice new fat check when we start the new year. Let’s talk a little bit about that.

Logan DeGraeve: Due to the large inflation, the Social Security cost-of-living adjustment (COLA) is 8.7%. Your paychecks are going to get bigger. That’s important and the planning of that is important. If you haven’t had to adjust your spending, there’s something we need to start looking at with an increase in Social Security. Maybe you’re already getting a little bit too much money coming from your investments with the IRA.

Have a conversation with your financial planner once you start getting those checks. Don’t take more out of the IRA than you need to because you’re paying tax on it unless you’ve had a proper planning conversation. Also, as we know with the markets, depending on your allocation, you might be down 10% to 20%.

Well, don’t take more money out than you need. That’s going to be a critical piece that I plan on working with our CPAs on early in the year. Do we need to change that distribution planning, the income planning?”

Bud Kasper: And how many times have we seen that we might have had an increase in Social Security, but they take it away on the Medicare?

Logan DeGraeve: A lot. More often than not.

A Dream Scenario: Social Security Goes Up and Inflation Goes Down

Bud Kasper: In a best-case scenario, we’ll have bump in Social Security with people’s checks increasing by more than $140 or so a month and inflation goes back down, we’d be getting a residual benefit over and above because they’re not going to take it back. They’re not going to reduce the COLA benefit. Therefore, we can turn lemons into lemonade. But as everyone knows, inflation has been on our backs all this past year.

Logan DeGraeve: That’s hopefully what we see on the back half of next year. But we have a long way to go with inflation. Core inflation is still running very hot.

A Quick Review of Some of the Retirement Challenges

Bud Kasper: So, we look at that as one of the retirement challenges. Remember that you’re retired and have no more paychecks. That’s another retirement challenge with figuring out where your income is going to come from. We just talked about the Social Security and the increased benefit that’s happening with that. But let’s go a little bit deeper and talk about other typical sources of income.

Logan DeGraeve: Everyone is going to have Social Security for the most part. Some people may have pensions. When and how are you going to take your pension? It’s not just as easy as, “Well, I’m going to take the largest benefit.” Because what did we talk about earlier? How does it impact your spouse? What is the right decision? You need to take that into consideration, and you can’t do that without a financial plan.

The Three Tax Allocation Buckets

Now, let’s talk about the other sources of income. A lot of people have mostly what we call tax-deferred money. That’s 401(k)s, IRAs. None of that money has ever been taxed. If you want $5,000 net a month from that account, you’re probably going to need to take out about $6,000, $6,200 every month. That’s something that you need to account for. But is that the best place to take money from? Or do you take it from a bank account or a brokerage account?

The other source of money is that tax-free money, which is the Roth. We consider it to be the precious money because it grows tax-free through the rest of your life. Your loved ones don’t have to pay tax on it either.

Your Tax Allocation Depends on Your Personal Situation

We look at those sources of income. Which ones do you use first? How do you use them? I don’t know the answer because I don’t know your situation.

Bud Kasper: And then it must be vetted through the lens of taxation as well. But Logan is so right. One of the things that Dean always emphasizes is needing to understand the sources of our income to determine how much you need to retire. Some of it is tax-deferred, some of it is tax-free, and some of it is taxable. It is the combination of the three many times that will end up being the successful plan from an income perspective that people are looking for. We’re trained to get the best after-tax result for our clients.

Logan DeGraeve: Good point. I referenced this earlier, but one of the articles I wrote recently was about understanding your tax allocation. I talked about those three buckets of money and used some examples of people that have the flexibility with taxation and having money in different accounts versus someone that just has money in a 401(k) or an IRA.

How You Save Matters

A lot of people say that they can’t do a whole lot about that. That may be true, but that’s why is that so important to start planning early. The way you save today and tomorrow when you’re 20, 30, 40 years old gives you that flexibility in retirement.

Pensions or Lump Sums

Bud Kasper: Logan was talking about pension benefit. We do work with people that have pensions. A lot of them have just gone away. They’re not available in corporations anymore. One of the ones that we’re working a case right now involves a person in Colorado. In this case, he can take the pension or the lump sum.

With a pension, you have the backing of the corporation to make payments to you for the rest of your life. From the perspective of taking the lump sum, now the responsibility for that income is on you. Therefore, planning around those decisions is critical to determine where the best outcome is going to be.

Logan DeGraeve: You simply need to figure out how much money you need to make on that lump sum for the rest of your life to deliver that level.

Bud Kasper: And can you.

Logan DeGraeve: I’ve worked with this decision a lot and a lot of people ask me where I feel comfortable? I have another quick story. I started talking with someone who had previously been talking with an investment advisor. They didn’t feel right because the investment advisor had a 7.7% hurdle rate on this lump sum. The investment advisor wanted them to take it because he could manage the money. Well, the wasn’t the right thing to do because it wasn’t in that person’s best interest.

I have one more note on pensions, too. Especially right now with these rising rates, some of those times these lump sums are getting smaller and smaller. That’s something to keep in mind.

Again, It’s Critical to Start Planning Sooner Rather Than Later for Retirement

Bud Kasper: Even if you’re not preparing for a retirement quite yet, our services are still keenly available to direct you in a position so that when retirement does come up, you’re optimizing the results. The key is getting started early.

Logan DeGraeve: And like I just referenced, if you’re 30 years old and you’re working, the way you’re saving your money today has such an impact on your retirement. Yes, you’re doing the hard part of saving. That’s always the most important thing. But where should you save? Should you do traditional 401(k), Roth 401(k)? Are you doing the Roth IRA? Are you doing the brokerage account?

Creating a Game Plan for Retirement

Bud Kasper: These retirement challenges might not be much fun to experience if you haven’t done the planning. But planning to mitigate those retirement challenges can be fun. Think of it as creating a game plan for retirement.

Here’s an interesting point as well. When we look at the number of jobs that are out there and the number of workers that are out there, we have more jobs than we have workers. One of the reasons for that is 10,000 people a week are retiring because of age. We’re having more jobs and can’t find workers from that perspective. But think about that from the perspective of the new retiree because now they are shifting into a very difficult period.

There is no doubt about it. This has been a challenging year from an investment perspective. I hope that you’re not working with somebody who’s just a buy and hold fanatic and telling you that you know shouldn’t make alterations or adjustments to your risk.

If that’s the case, I don’t think they’re necessarily serving your best interest. That being said, let’s talk more about ways that people save for retirement. Earlier, we were talking about IRAs versus Roth IRAs.

Logan DeGraeve: I think that that’s an important decision. It’s critical to figure out where you’re going to save. Are you going to save to your traditional 401(k)? You don’t have to pay the tax now, but you’ll need to pay the piper down the road.

5. Changes in Taxes, and Potential Higher Tax Brackets

Bud Kasper: What does that tell us? We need to anticipate what taxes are going to be.

Logan DeGraeve: And where do you think taxes are going to go? We know if Congress does nothing, taxes go up in 2026. That’s something to keep in mind also with the Roth IRA because that’s tax-free growth.

Bud Kasper: Now, granted you paid the tax on it before it went in. But if you’re in your 30s, 40s, or 50s, wouldn’t you like to eliminate that tax while you’re still compounding the growth benefit of that tax-deferred investment?

Logan DeGraeve: It’s one of those things that you just don’t understand until you’re in your 60s and 70s with how much of an impact that having to take all the IRA money out and paying taxes on it has on things like your Medicare premiums. We’re not going to get into it, but they’re means tested. It depends on how much income you make.

And like we said earlier, don’t forget about the taxation of Social Security, what your RMDs look like, possibly becoming a single tax filer…

Bud Kasper: What? My Social Security is taxable?

6. Managing Investment Risk to Achieve Retirement Goals Instead of Only Saving

Logan DeGraeve: So, all that. Bud made a good point earlier about when you’re stepping into retirement and thinking about investment management. That’s also on our list of retirement challenges. Bud and I have said for a long time that the level of risk that you’re taking needs to be based on what your goals are. That’s why we said earlier that it’s so important that we understand who you are and what you want to do so we can figure out how the investments need to be placed.

Bud Kasper: Part of the financial planning process that we go through with prospective clients and clients is looking back in history. For example, we’ll look at significant market downturns like the Great Recession of 2008. Let’s say that your portfolio had dropped 15%. What would your reaction be?

If the person isn’t retired and we’re looking at that number, then we give them three responses to that. I wouldn’t be worried, I’d be fine, or this would be critical. I can guarantee you from my personal experience over all these years that they’re underestimating their reaction to that type of a decline. Therefore, our responsibility as CFP® Professionals is to ask them to take a gut check with this.

Marrying the Financial Plan with the Investment Plan

Logan DeGraeve: And our responsibility as CFP® Professionals is to marry the financial plan with the investment plan so we can tell you your optimal level of risk. Let’s use an example. The plan is going to give you a probability of success. You may be at a 95% probability of success, whether you’re at 30% stocks or 70%. But where does that feed off? That feeds off what your goals are.

How much money are you going to spend? How much money you’re going to spend early on in retirement? Do we need to front load retirement? Do we need to have some money that’s safe because maybe you want to buy a second home in a couple years.

7. Health Care, Medicare, and the Costs of Aging

That also hits on one thing though too. We often have people that come to us and say that they want to spend, for example, $5,000 net a month. That’s great. Where is that going to come from and what makes that up?

Because what Bud and I do is break out the health care goal separately than the living expense goal. And why is that? Because health care and college historically are going to inflate way differently than the basket of goods at the grocery store. Now, I said historically because everyone knows what we’re dealing with right now with inflation.

Retirement Planning Is a Series of Tradeoffs

So, you need to sit down and figure out how much you want to spend each year. Maybe it’s $100,000. How much are you spending for travel? What is health care going to cost? How much, if anything, do you plan on giving to charity? What are the things that matter to you? Because at the end of the day, retirement planning is nothing more than a series of tradeoffs.

Bud Kasper: And many people are downsizing at that time in preparation for retirement. That must be factored into the data that we’re taking.

Logan DeGraeve: Well, downsizing to pay more right now.

Bud Kasper: It seems that way. So many people are tied into the investment side of the planning process since it’s the fuel for the car. But many people have said in the past to buy and hold and to not make any alterations to the portfolio. They’re afraid doing that will mess it up because at some point the market will come back and they’ll get those back.

Protecting Your Assets

I don’t agree with that. When someone has retired, it’s critical for us to protect their assets to the best of our ability. That doesn’t mean that you’re not going to have losses. But if you can control those losses to the extent that when the market does return to better times, we can go back and recapture some of those losses a little bit faster than you would if you were totally exposed.

Logan DeGraeve: Absolutely. I’m thinking about losses, the markets, and health care costs in retirement and how large those are. There is a lot of uncertainty to overcome in those areas. When you’re 75, 80, it’s likely that your two most expensive things that you spend money on are taxes and health care. Dean told me that was kind of sad when you think about it, but it’s true. You need to plan for these things.

With our financial planning software, you can stress test to see how a long-term care stay would impact your plan. How are you going to pay for it? What is your plan for that?

8. Planning Your Legacy, Estate Planning

So, we’ve talked about retirement challenges with health care, investments, and taxes—among other things. But there’s one more retirement challenge that we haven’t really discussed yet. That’s estate planning, which kind of puts the wrapper on everything to do with retirement challenges.

I can’t stress enough is everyone needs an estate plan. A trust isn’t for the ultra-rich like everyone thinks, but everyone needs something. Health care directives, powers of attorneys.

Bud Kasper: That’s right. How’s your legacy going to go to your heirs? If that’s the case, are we doing that as efficiently as we can? Dean recognized that early on. He wanted to make that as an important part of the process that we go through as CFP® Professionals.

Logan DeGraeve: With being CERTIFIED FINANCIAL PLANNER™ Professionals, one thing that Bud and I focus on that can oftentimes be missed is looking at estate planning through the lens of someone who is stepping into retirement with kids and grandkids. We try to make sure that these younger families have done the guardianship provisions for the kids. If, God forbid, something happens to mom and dad, it’s not as simple as the kids going to X, Y, and Z.

There’s Much More to Your Financial Plan Than Investments

Bud Kasper: The takeaway on this is that an investment strategy is not a financial plan. I think more people are starting to realize that because we’re in a difficult market and difficult times. So, to begin building your financial plan and determine how these retirement challenges personally impact you, check out our financial planning tool. You can use it at no cost or obligation and from the comfort of your own home by clicking the “Start Planning” button below.


The only way to get an answer and get some relief from these retirement challenges is to work with financial professionals. Along with making our financial planning tool available to you, you can schedule a 20-minute “ask anything” session or complimentary consultation with one of our CERTIFIED FINANCIAL PLANNER™ Professionals. We can even screen share while using our financial planning tool and go through any questions that you may have.

We’re always thankful for the opportunity to talk to you. That’s all for our discussion on retirement challenges. I’m Bud Kasper, along with Logan DeGraeve. Thank you for being here. Logan.

Logan DeGraeve: Thanks for having me, Bud.

Bud Kasper: Enjoy your weekend.

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Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.