Retirement Preparation: 5 Things You’ll Wish You Knew Before Retiring

By Chris Duderstadt

June 27, 2023

Retirement Preparation: 5 Things You’ll Wish You Knew Before Retiring

Key Points – Retirement Preparation: 5 Things You’ll Wish You Knew Before Retiring

  • Understanding Why Retirement Preparation Is Critical
  • What You May Be Missing That You Won’t Want to Before Retiring
  • Communication About Your Plans Is Crucial to a Successful Retirement
  • Relieving Stress as You Approach Retirement
  • 9 Minutes to Read | 11 Minutes to Watch

Seeing Parallels Between Golf and Retirement

Executive Advisor Logan DeGraeve is one of the more avid golfers on our Modern Wealth Management staff. He’ll be one of the first people to tell you that there are a lot of similarities between golf and retirement. One of the main similarities is that a successful retirement and successful round of golf both require a lot of preparation.

Whether golf is a key component of your retirement lifestyle or you’ve never played before, picture yourself on the golf course for a minute. If you want to play your best, you’re probably not going to immediately head over to the first tee box. You might hit a few balls on the driving range, spend some time on the practice green, or at least stretch a bit. Preparation is key to being at the top of your game.

Now, think about your retirement and the necessary preparation for it. If you want to retire successfully, you’re not just going to save blindly to your 401(k) throughout your career and then suddenly decide to retire. You need to start thinking about what you want your retirement lifestyle to look like at least five to 10 years before retirement and build a comprehensive financial plan that allows you to accomplish your goals. Preparation is key when it comes to retirement as well. That’s why Logan is going to discuss retirement preparation and the five things that you’ll wish you knew before retiring on the Modern Wealth Management Educational Series.

1. You’ll Wish You Knew What You Were Going to Do with the Rest of Your Life If You Didn’t Prepare

We can’t stress enough that retirement preparation is so important. Every day is a Saturday in retirement. Maybe part of it will be spent on the golf course. If you don’t have a purpose or a plan and you decide to retire on a whim because you’re tired of working, that’s an issue. If the only thing you’ve known is work and you retire to nothing, you might struggle with what you’re going to do each day. You need to define what’s important to you before retirement and have a purpose in retirement. That’s a huge part of retirement preparation.

“It’s very important when you’re five to 10 years from retirement that you’re starting to think about what your retirement is going to look like. It’s not just about financial goals. Do you want to volunteer? Do you want to work part-time? Maybe you want to play golf a couple of times a week. Maybe you want to travel. What is that going to look like? How much time are you going to spend with your kids and grandkids? The most important thing is that your retirement is thought out and that there’s a plan. You didn’t work your whole life to do nothing, so you need to talk about retirement before it happens and plan for it.” – Logan DeGraeve

At the end of the day, whatever goals you have for retirement should be what’s driving your financial plan. And that should then drive your investment decisions. Until you’ve clearly defined what you want the rest of your life to look like, it’s impossible to build a financial plan that will deliver the results you want in retirement.

2. You’ll Wish You Had Talked to Your Partner About Your Retirement Plans Before You Retired

It’s critical for you and your partner to be on the same page heading into retirement. During your career, you’re probably spending just as many, if not more, waking hours with your co-workers as you are with your partner. That changes in retirement. You’ll be spending a lot more time with your partner.

“What are you and your partner’s goals? Are you going to travel together? Again, do you want to spend more time with your kids and grandkids? Are you on the same page about your monthly budget? There are a lot of couples that won’t be on the same page. One partner might say that they need $5,000 net a month while the other partner might say $8,000. Make sure you both are on the same page.” – Logan DeGraeve

And what about your legacy plan? If you don’t get to spend your last dollar on your last day, are you making sure that it’s going to your loved ones or charities? Is that goal important to you? If it’s not, that’s going to change the type of financial planning that our team would do for you. If it is, we want to make sure that it’s top of mind during every review meeting. Retirement preparation doesn’t stop once you’ve retired. You need to update your plan as your goals and other things in your life change in retirement.

3. You’ll Wish You Had Start Planning for Taxes Sooner

This could easily be number one on Logan’s list. Taxes in retirement are pivotal. It’s the first time in your life when you can begin to set the chessboard for what you want your taxation to look like. It’s the first time that you won’t have W-2 income. So, depending on how you’ve saved, you can know in early January what your taxes are going to look like for that calendar year.

“When you start saving to your 401(k) at a young age, if you’ve only saved to the tax-deferred side of it that has never been taxed, you have a silent partner in there. Every time you take withdrawals from that account, you’re going to need to worry about taxes. This isn’t something that you want to start planning for when you retire. Start looking at this 10 years before retirement. And make sure you have proper asset allocation in case you need to make multiple withdrawals from certain accounts.” – Logan DeGraeve

Taxation of Social Security

When it comes to retirement preparation and your taxes, you need to keep Social Security in mind. Social Security is taxed unlike any other portion of your income. It’s taxed off your provisional income. How will all your other income sources—pensions, investments, IRA withdrawals, future Required Minimum Distributions—impact the taxability of your Social Security. It can be something huge that happens that you might not be expecting.

Taxes on Capital Gains

There’s also the tax treatment of capital gains that needs to be considered. If you are someone who has a brokerage or after-tax account, there are certain things that are in the 0% capital gains bracket. You need to build a plan that has you paying the least possible amount in taxes over your lifetime.

Required Minimum Distributions

One of the biggest challenges people face in retirement is Required Minimum Distributions. At 73, you must start taking distributions off your 401(k)s, IRAs, and other qualified plans.

“Here’s the issue. A lot of times, that money is more than the clients need to live with. It will start taking you into higher income brackets that were maybe higher than when you were working. This is where you want that proactive tax plan that has a five, 10, 15-year outlook so you can start planning on RMDs. At the end of the day, the train is coming down the tracks. Make sure you start planning before it gets closer and closer.” – Logan DeGraeve

RMDs are a critical piece in retirement preparation. They’re oftentimes mitigated by Roth conversions, Qualified Charitable Distributions, and donor-advised funds. If you’re working with an advisor and they’re not sitting down with a CPA in the same room with you, there’s a good chance that you’re missing something.

4. You’ll Wish You Knew That Having a Financial Plan Can Relieve A Lot of Stress

When you step into retirement, you’ve finished this accumulation phase of life and are starting the distribution phase. The stressful thing about the distribution phase of life is that it’s when you’re spending down your assets. You need to figure out what assets you’re going to spend down first a couple of years before retirement.

“Let’s think back to 2022. It was a tough year in the stock and bond markets. The traditional 60-40 stock-to-bond investor had equities that were maybe off 12-15% and bonds that were potentially off 10%. When you’re drawing down your assets, you need to start thinking in advance with where you’re going to spend from. No one wants to sell assets that are down 12-15%. That inherently creates sequencing of return risk, which is very stressful when you’re drawing down the account.” – Logan DeGraeve

Alleviating Sequencing of Return Risk

So, how do you alleviate sequencing of return risk? First, you need a financial plan that lets you know whether you’re OK. When Logan sits down with his clients—usually between two and four times a year—the biggest question that comes up is whether they’re still on track. More often than not, one bad year in the markets won’t take you off track. But if you think about investing in retirement, there are a lot of times where emotions can creep in. You don’t want to let them get the best of you.

“For example, you see the market is down and had planned to go to Italy for your 50th wedding anniversary. So, you decide not to go to Italy because you don’t think you can afford it. But in reality, a financial plan that’s done correctly will alleviate the stress that’s involved in those big life decisions.” – Logan DeGraeve

Other Stressful Decisions

Figuring out when you and your partner are going to take Social Security is also a vitally important piece of retirement preparation. Other stressful decisions include how you’re going to take a pension and dealing with rising long-term care costs. Those decisions aren’t meant to be looked at in a vacuum. They need to be looked at in terms of how they impact your overall financial plan. And it’s not just about you when you’re making those stressful decisions. You need to consider your partner as well in all aspects of retirement preparation.

“With a proper financial plan, you can stress test all these things and have conversations about them. If you just have an investment plan, you just have a plan of hope. You hope that your investments make a certain amount in return so you can outpace inflation and potentially pay for something like long-term care.” – Logan DeGraeve

5. You’ll Wish You Had Gotten Professional Help Sooner

The last thing people wish they would know before retiring is all about retirement preparation. They wish they would’ve gotten professional help sooner. They could have retired sooner or had a better retirement.

“The most precious commodity we have is time. A good CFP® Professional should figure out your goals, hopes, and dreams are and start prioritizing those things so they don’t rob anyone of their time. If you can retire five, six, seven years sooner than what you think, you need to know that. A lot of people tend to think that they need to work until 62 because that’s when they can get on Social Security. A lot of people think they need to work until 65 because that’s when they can get on Medicare. And a lot of people say that they need to work until 66 and 10 months because that’s their full retirement age. There are all these misconceptions for how long people think they need to work. If you don’t enjoy your job, wouldn’t you want to know if you don’t need to work anymore?” – Logan DeGraeve

Our Team Is Dedicated to Working Together for Our Clients

You need a team of professionals that’s working for you. Logan is one of the CFP® Professionals at Modern Wealth. We also have in-house CPAs and estate, insurance, and investment specialists. Everyone should have a team of professionals that’s working for them. It’s not about one person. It’s about the team working together for you.

“I don’t try to act like I know as much about taxes as a CPA does. It’s important to work together as a team. This is too important for you to leave to guesswork. It may be something that you think you can do on your own, but in reality, there’s too much to it. A lot of people don’t even think about inflation. While the basket of goods at the grocery store has inflated like crazy, it’s not going to inflate like health care over long periods. It’s important that you’re sitting down with someone who is looking at the whole picture to hopefully enhance your retirement or live out dreams sooner.” – Logan DeGraeve

Logan has had clients interested in buying second homes in warmer climates for when they retire. But whenever a client tells him that, Logan wants to see if they can afford to buy before retirement so they don’t need to wait until retirement to enjoy it. Because if they can afford before retirement, why wait until retirement to enjoy it? And to know whether you can do that, you need to do some retirement preparation by building a financial plan.

Back to the Parallels Between Golf and Retirement

As we finish this discussion on the importance of retirement preparation, let’s circle back to the parallels between golf and retirement. If you’re playing by the rules in golf, there are no mulligans. Well, there are no mulligans in retirement either.

Once again, that’s why practicing at the range or putting green for golf can be helpful before a round and why doing retirement preparation five to 10 years before retirement to determine your retirement lifestyle is critical. Logan can probably give you a few golf pointers, but that’s probably not why you’re reading this article. Hopefully the five things that Logan reviewed can help you with your retirement preparation, but we have a few other ways we can help get you started on that as well.

How to Start Preparing for Retirement

First, you can get into the swing of things with your retirement preparation by building your personalized financial plan with our financial planning tool. This is the same financial planning tool that Logan and our other CFP® Professionals use with our clients, and you can use it at no cost or obligation. You can begin building your plan from the comfort of your own home by clicking the “Start Planning” button below.

Retirement Preparation

Start Planning

Also, if you have questions about retirement preparation or specific aspects of your plan, let us know. As Logan mentioned, it’s so important to work with a team of professionals. We can give you a better understanding of that during a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals. The setting of the meeting is up to you—whether it’s in person, virtually, or by phone.

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We hope that that these five things that Logan reviewed on retirement preparation were helpful to you and welcome the opportunity to discuss them with you further. It’s our mission to give you more confidence, freedom, and time in retirement.

Resources Mentioned in This Article

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.