Christina Featured Again on MoneyGeek

December 30, 2021 | Filed under: Retirement Planning, Financial Planning, Financial Literacy

Money Geek. Expert Interviews Christina Ubl CFP, CDFA, co-owner of Clute Wealth Management

Christina was featured as a guest expert in the MoneyGeek guide "Smart Spending in Retirement". She answered questions and provided insight about which accounts to withdraw retirement spending from, what strategies could help make your savings last longer during retirement, and some common myths about retirement spending.

You can read excerpts of Christina's interview below and  you can find it here on the MoneyGeek website.

Christina's Excerpt:

How much should retirees withdraw annually and from which accounts should they draw income first?

While there is no fixed answer to how much you “should” withdraw, if you are age 72 or older, you must withdraw an annual Required Minimum Distributions (RMDs) from Traditional IRAs and 401(k)s/403(b)s. (The IRS penalty for not withdrawing your RMD is 50% of the amount that should have been withdrawn.)

Whether or not you should follow the popular (and often controversial) “Four Percent Rule” for annual retirement withdrawals depends on several factors:

  • Your life expectancy. Those who live longer need their portfolios to last longer, and medical costs and other expenses can increase as you age. The Social Security Administration offers a basic life expectancy calculator based on gender and age.

  • Availability of a pension (or other guaranteed sources of income)

  • Estimated future expenses – including gifting to charitable organizations and/or family

  • Estimated future income or inheritance – if anything outside of Social Security and/or pensions

Which accounts should you draw from first?

  • If your goal is to minimize current taxes, you may want to draw down your after-tax Roth accounts first and limit withdrawals from tax-deferred accounts as much as possible.

  • If your goal is to maximize flexibility or if you are younger than age 72, an alternative strategy could be to draw down tax-deferred accounts to minimize future tax implications when RMDs begin.

What's the best strategy to ensure that retirement funds last?

You have no guarantee that you won’t run out of funds in retirement, but avoiding a few of the following common pitfalls helps increase the chances of having adequate resources:

  • Retiring too young/too early

  • Spending too much pre & post-retirement

  • Trying to hold onto the family home even when it becomes unaffordable

  • Gifting too much to family members

  • Being too conservative (or aggressive) with investments

  • Making major decisions during high emotional times or being frozen in indecision

  • Not factoring in that health care costs are the number one unknown expense of retirement – and not having a plan in place to address these increased costs.

  • Not reviewing estate plans for areas that need to be addressed (an area of special concern for women):

Are you married to someone with a pension? If yes, are you going to continue to receive that income upon their death should they pre-decease you? If not, is there adequate insurance on the spouse to replace that guaranteed income later?

If there are previous marriages (or children from previous marriages), does the will or trust outline that you are a beneficiary/heir and provided for in some way?

Is there adequate life insurance on your spouse to cover burial expenses and existing debts?

  • If retiring as an owner of a small business, not structuring a fair & equitable buyout

  • Investing all your funds in illiquid assets (such as real estate)

What are the worst money moves for retirees, contrary to popular belief?

Many people believe that they should do the exact same thing that their parents/siblings/friends/co-workers did because it worked out for them. One of the most harmful things you can do is not to recognize that your life and goals (and retirement) are unique to you. I often hear things like “I took the life-only pension because that’s what “Susie” did & it worked out great for her” or “Everybody says I better take Social Security the soonest I can because everyone knows that there won’t be anything left.” And the one I hear most often is “We’re going to give our home to our kids, so the state doesn’t take it.” On an individual basis, each of these may make the most sense for someone, but to believe that there is only one option for everybody is extremely harmful and scary.

My advice is to not go-it-alone; get help from a professional that works with retirees and knows what questions to ask and what pitfalls may come up. And most importantly, start planning early!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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