Thank you for joining us today. We’re covering a great topic: preparing for retirement. The only thing better than preparing for retirement is actually living in retirement.

We’ll start by discussing where to begin, then assess your financial situation, create a retirement budget, understand Social Security, review healthcare needs, evaluate investments, develop an income plan, and finish with estate planning.

As we begin, it’s important to recognize that retirement planning is highly individual. You’re probably not going to leave today with every answer. Instead, you’ll leave with a clearer understanding of the questions you should be asking and the issues you should be considering as retirement approaches.

Retirement planning starts with a vision. Ask yourself:

• When do I want to retire?
• Where do I want to live?
• What do I want to do with my time?
• How much money will I need?

These are the foundation questions that help shape everything else.

There are several important retirement milestones to be aware of:

At age 50, you become eligible to make catch-up contributions to retirement accounts such as a 401(k), IRA, or Roth IRA.

At age 59½, the IRS penalty for early withdrawals from retirement accounts generally goes away.

At age 62, you become eligible to start collecting Social Security.

At age 65, you become eligible for Medicare.

Depending on your birth year, your full Social Security retirement age falls between ages 66 and 67.

At age 73, required minimum distributions begin, meaning the IRS requires you to start taking withdrawals from certain retirement accounts and paying taxes on those distributions.

Next, assess your current financial situation. Before planning where you’re going, you need to understand where you’re starting from.

Review your savings, investment accounts, retirement accounts, debts, mortgages, vehicles, and other assets. Think about whether you’ll keep these assets during retirement or make changes such as downsizing, selling property, or relocating.

Inflation is another major consideration. Everything becomes more expensive over time, from groceries and utilities to travel and entertainment. The money you have saved today won’t buy the same amount in the future.

One useful guideline is the Rule of 72. Divide 72 by the inflation rate to estimate how long it will take costs to double. At a 4% inflation rate, costs could double in roughly 18 years. Since retirement may last 20 to 30 years or more, accounting for inflation is essential.

Now let’s talk about budgeting.

Many people don’t know exactly how much they’ll need to live on in retirement. A budget helps answer that question.

Start with fixed expenses such as housing, property taxes, insurance, utilities, food, and transportation. Then consider discretionary expenses like travel, dining out, golf, hobbies, and entertainment.

You’ll also want to think about future goals and major purchases. Perhaps you want a vacation home, a newer vehicle, home renovations, charitable giving, or financial gifts to children and grandchildren.

A common rule of thumb suggests that retirees spend about 75% of their pre-retirement income, but that’s only a guideline. Your actual spending needs could be higher or lower.

Now let’s move to Social Security.

Social Security is one of the most common retirement topics and often generates a lot of questions.

Your full retirement age depends on your birth year. If you begin collecting Social Security before reaching full retirement age, your monthly benefit will be reduced. For example, if your full benefit would be $1,000 per month and you start at age 62, you might receive only $750 per month.

On the other hand, delaying benefits beyond full retirement age can increase your monthly payment. Benefits grow roughly 8% per year for each year you delay beyond full retirement age, up to certain limits.

People often ask whether they should start Social Security early or wait. The answer depends on your situation.

A common way to think about it is this: would you rather have more money earlier in retirement or more money later in retirement?

Generally, the break-even point between claiming early and delaying falls somewhere around your late 70s or around age 80.

Many of our clients choose to start benefits earlier because they’re most active during the early years of retirement and want greater flexibility to travel and enjoy those years.

Another important consideration is taxes. Depending on your income, up to 85% of your Social Security benefits may be subject to income tax. Other income sources such as pensions, wages, dividends, and investment income all factor into that calculation.

If you begin collecting Social Security before your full retirement age and continue working, earnings limits may reduce your benefits until you reach full retirement age.

Next, let’s discuss healthcare.

Healthcare is one of the largest retirement expenses. A typical 65-year-old couple may spend more than $300,000 on healthcare costs throughout retirement, including premiums, Medicare costs, and out-of-pocket expenses.

For people who retire before age 65, health insurance is often one of the biggest challenges. You may have access through a retiree health plan, a spouse’s employer-sponsored plan, or the healthcare exchange.

Medicare begins at age 65 and consists of several parts:

• Part A covers hospital insurance.
• Part B covers medical services.
• Part C includes Medicare Advantage and supplemental options.
• Part D covers prescription drugs.

Another important healthcare issue is long-term care. Long-term care typically refers to assistance needed for chronic conditions, whether in a nursing facility or through in-home care services. Long-term care insurance has become increasingly expensive and may not be available or affordable for everyone, so it’s important to think about how you would handle these potential costs.

Now let’s talk about investment management.

As retirement approaches, it’s wise to revisit your investment strategy and risk tolerance.

Many people mistakenly become too conservative too quickly. While some reduction in risk may be appropriate, retirement often lasts 20 to 30 years. Some of your retirement assets may not be needed for decades, which means they still need growth potential to help fight inflation.

It’s important to maintain a balance between growth and stability.

This leads directly into income planning.

For most of your life, you’ve been accustomed to receiving a paycheck. Retirement changes that dynamic completely. Instead of earning income from work, you’ll be creating income from assets.

Potential retirement income sources include:

• Social Security
• Pensions
• Retirement accounts
• Rental properties
• Dividend-paying investments
• Health Savings Accounts (HSAs)

If you have access to an HSA, it can be an excellent retirement planning tool. Contributions are tax deductible, growth is tax deferred, and qualified medical withdrawals are tax free.

For those with pensions, several decisions may need to be made:

• Take benefits immediately or delay them.
• Choose a single-life option or a joint-and-survivor option.
• Accept monthly payments or a lump sum.

Each choice has advantages and trade-offs, and careful analysis is often necessary to determine what makes the most sense.

When it comes to retirement accounts, remember that withdrawals from different accounts can create different tax consequences. Traditional retirement accounts, Roth accounts, and after-tax accounts are all treated differently.

Taxes become a major component of retirement planning. Decisions about withdrawals, Roth conversions, Medicare premiums, and income levels can all affect the amount of taxes you pay during retirement.

One important point is that accumulating wealth is much simpler than distributing it. During your working years, time helps correct mistakes because you’re continuing to save money. In retirement, you’re taking money out of your portfolio while relying on it for income. That’s why having a thoughtful and flexible distribution strategy is so important.

Finally, let’s discuss estate planning.

Review your wills, trusts, beneficiary designations, powers of attorney, and other estate documents regularly. As your financial situation changes and laws evolve, your estate plan should be updated to ensure it still reflects your wishes.

As we wrap up, here are the key takeaways:

First, maximize retirement savings whenever possible.

Second, take advantage of Health Savings Accounts if they’re available to you.

Third, begin building a retirement budget and understand your future spending needs.

Fourth, think about how you’ll spend your time in retirement. Financial readiness is important, but so is having purpose, fulfillment, hobbies, travel plans, volunteer opportunities, and meaningful activities.

Finally, don’t try to navigate retirement planning alone. It’s a complex process involving investments, taxes, healthcare, income planning, Social Security, and estate planning. Professional guidance can help you make informed decisions and avoid costly mistakes.

Thank you for attending today. We appreciate the opportunity to work with you and help guide you through these important life transitions. Have a wonderful day.