Retirement Strategies

5 Strategies for an Outstanding Retirement

5 Strategies for an Outstanding Retirement

You’ll likely spend approximately one-third of your life living out your retirement years so you want it to be a great experience.  Having no money or little income is not my idea of a pleasant experience.  Here are five strategies to help boost your retirement income:

  1. Trifecta Investing Strategy. If you fall into the twenty, thirty or forty-year-old age group, this strategy is for you.  When most people think of saving for retirement, 401ks and IRAs typically come to mind because of the income tax deduction you receive for your contribution.  It’s true that qualified retirement plans are one of the very best ways to accumulate wealth, not only because of the tax deduction, but also because your money grows tax free until you withdraw money during retirement.  And that’s when the problem begins.  If your entire retirement is built around qualified retirement plans, you significantly limit flexibility regarding income tax planning.  A better strategy is to accumulate money in different types of retirement ‘buckets’.  If, in addition to your qualified retirement bucket where withdrawals are taxed as ordinary income, you also had money invested in a personal investment (after tax) bucket, during retirement, you get to choose which bucket to draw from in a given tax year.  Depending on the cost basis of the securities in this bucket, withdrawals may be non-taxable, subject to the lower long-term capital gains rates or potentially a loss that can be used to offset ordinary income.  Even better is to add a third bucket, the Roth IRA.  Here, withdrawals are tax-free.  We have one client where we’ve avoided paying virtually any income taxes for more than ten years!
  2. Downsize your home. One of the best ways to improve your retirement income is to move into a smaller less expensive home.  Our number one goal is to have the client downsize so as to eliminate any mortgages while choosing a lower maintenance home, allowing them to win twice by eliminating mortgage payments and reducing expenses.  Even better is if they can downsize and retrieve some equity from their old home that can be used to add to their personal investment bucket.
  3. Home bonus strategy. A reverse mortgage can be an excellent strategy for someone who would like to maximize retirement monthly cash flow.  With a reverse mortgage, the mortgage company guarantees you a monthly income for as long as you live in your home.  If the value of your home drops below the mortgage amount, they take that risk and neither you nor your heirs will owe the mortgage company money at the ultimate disposition of your home.  Note that there are other reverse mortgage options as well.
  4. Work longer; start a new career. Retirement is overrated!  If you can find something you love doing during retirement this is the best choice for a lot of people.  Understand that a little bit of money goes a long way for retirees.  What could you do that would be loads of fun and make you some money?
  5. Choose your Social Security strategy. Give serious thought to when you begin receiving Social Security benefits.  Generally, the poorer your health, the sooner you’ll want to begin taking your benefit.  For those folks with great health, delaying benefits until age seventy can significantly boost lifetime benefits, particularly if you have a spouse.  At the death of the higher-earning spouse, the lower-earning spouse steps in to the higher-earning spouse’s place to continue reaping those big payout benefits.

Ultimate Fitness Quest 2016Ultimate Fitness Quest status report:  OK, I had a set-back last week (week #2).  My goal is to lose 15 pounds of body fat in thirty days.  For week one, I lost 5.8 pounds.  Then last week, I gained 2.6 pounds!  And I thought I did everything right but obviously I didn’t.  It’s a good lesson in goal-setting.  The road to success in achieving goals is littered with potholes and roadblocks.  What defines you is how you handle the obstacles.  If you’d like to follow my fight to get back on track or you’d like to challenge yourself to lose a few pounds before summer, join me at or on Facebook.

Healthcare Planning for Retirment

Healthcare Planning for Retirement- The New Paradigm

Healthcare Planning for RetirmentHealthcare Planning for Retirement

A decade or so ago, there wasn’t a lot of discussion about how healthcare costs could ruin a perfectly good retirement planning strategy.  What has changed is the massive numbers of Baby Boomers headed for the retirement exits along with steeply rising healthcare costs.  In today’s world, projected healthcare costs during retirement deserves to be a line item in your planning…and a big item of focus.

Healthcare costs have risen sharply over the years, in part due to advances in medicine.  As a result, those eighty million Baby Boomers are living longer which adds financial pressure on virtually all financial systems including estimates that out-of-pocket costs for healthcare could exceed $250,000 during your retirement years. What are the best ways to fund this enormous expense item?

  • Play the statistics and self-fund. If you have minimal assets and income, you’ll quickly qualify for Medicaid which will fund 100% of nursing care costs.  If you have assets, ‘playing the statistics’ means calculating your potential out-of-pocket costs based on the average nursing home stay should you be unlucky enough to end up there.  Based on research by Boston College’s Center for Retirement Research, there is only a 27% chance that a man age sixty-five will need nursing home care.  If he does, the average stay is only ten months.  Assuming $200 per day costs, you’d only need about $60,000.  For a woman age sixty-five, the odds of ending up in a nursing home are 44% with the average stay being sixteen months.  Convert that to dollars and total costs would be about $100,000.  Of course, here you’re playing the averages…meaning half of the people stay longer and half shorter.  My own experience dealing with real cases is that most people opt to ‘stay at home’ versus going into a nursing home and this would likely cause costs to rise, perhaps sharply.
  • Fund expected costs with insurance. Traditionally many people have chosen to buy long-term care insurance as a way to fully or partially fund future in-home or nursing care.  The problem that I’ve seen is that the insurance companies significantly underestimated their future expense obligations and experienced heavy losses.  Many got out of the business while others have significantly raised premiums on their policyholders.  My own personal experience is that my carrier, Met Life, has raised premiums some 58% and has indicated they plan to continue raising premiums as state-by-state insurance commissioners will allow.  Premiums could become unaffordable.
  • Use new hybrid insurance products. In response to the fallout in the traditional long-term care insurance industry, insurance companies have developed new products that combine some element of a life insurance policy (often with a large lump-sum, up-front deposit) with a long-term care benefit.  There are a number of variations but generally if you never tap the policy for long-term care benefits, your beneficiaries receive life insurance death benefits.

The rising costs of healthcare presents a complex financial puzzle for retirees or those people planning their retirement.  I strongly recommend that you meet with your financial professional for assistance in navigating this financial minefield.

Ultimate Fitness Quest (UFQ) status report.  I set up the UFQ as a lesson in goal setting where I’ve challenged myself to lose fifteen pounds of body fat in thirty days.  For my first week weigh-in, I lost 5.8 pounds!  I’ve done this while eating healthy and exercising daily and have rarely experienced ‘raging’ hunger because I’m generally eating something every three to four hours.  If you’d like to lose a few pounds before summer, it’s not too late to join the Ultimate Fitness Quest 30-Day Challenge.  We’ll keep it open through May 31st, so get a couple of friends and join the two hundred-plus folks who are following the UFQ program.  We have lots of free resources to help you (approved food list, sample meals, etc.) along with expert advice from a nutritionist, physician, personal trainer and former Mr. America!  Follow friends and me at or on Facebook.


Earn 50% in One Month—Guaranteed, check your 401k Contributions

MONEY TUESDAY – Stewart Welch with the Welch Group joined us with a look at how to early 50-percent return in one month! Would you be wary of someone promising you a 50 percent return on a twelve-month investment? How about a one-month investment? Stewart assumes/hopes your early warning antennas are blaring in your head as well they should be. But there might be a way to actually make this happen for a number of really smart people. To determine if you are one of the lucky onesDesktopSW

Earn an immediate 50% return on your investment by investing in your 401K

Earn a 50% Return in 1 Month—Guaranteed

Earn a 50% Return in 1 Month—Guaranteed

Earn an immediate 50% return on your investment by investing in your 401K

Earn an immediate 50% return on your investment by investing in your 401K

Would you be wary of someone promising you a 50% return on a twelve month investment? How about a one month investment? I assume (hope) your early warning antennas are blaring in your head as well they should be. But there might be a way to actually make this happen for a number of really smart people. To determine if you are one of the lucky ones, take a moment to determine how much you have contributed to your company 401k plan as compared to the amount of company matching contribution. For example, let’s assume your company matches fifty cents on the dollar up to 6% of your compensation. If your salary is $100,000, your company would provide matching funds on up to $6,000 of contributions for this calendar year ($3,000 match). If you’re already having the company deduct $200 per month, you’re on schedule to invest $2,400 this year (with matching contributions of another $1,200). But you’re leaving $3,600 of potential ‘unmatched’ contributions on the table.

Are you really interested in earning a 50% return in one month? If so, have your human resources department up your 401k contribution by $3,600 from your December paycheck(s).

Your $3,600 investment will yield a 50% return based on the $1,800 employer matching contribution! In many cases, you can increase your payroll deduction directly through your company’s 401k website.

Ok, I admit that I used a little bit of trickery to get you to think about the importance of fully capturing your company’s matching contribution, but failing to do so is like turning your back on a portion of your compensation package…you’re just leaving money on the table. And, for many people, it never occurs to them that they could significantly adjust their payroll deduction  n the last month of the year.

Another barrier I often hear is, “I need all of my paycheck to pay my bills!” Look for ways you can get a bit creative:

  • Use personal Savings. Use personal savings or money from a personal investment account to help cover your December bills.
  • Use year-end bonus money. If you are expecting a year-end bonus, consider paying some of your December bills through whatever means necessary (savings, credit cards, etc.) to handle your cash flow needs until your bonus comes in.
  • Use a home equity line of credit. If you are using a HELOC or other forms of debt, be sure you have a sure source of repayment such as a bonus, significant pay raise, savings or investments.

Even if you’re already investing enough in your 401k to capture your company’s matching contribution, this is a strategy worth considering since you obviously will benefit from an income tax deduction and long-term tax-deferred growth.

For 2015, the maximum allowed contribution (your part) to a 401k is $18,000. If you are age 50 or older you’re allowed an additional ‘catch-up’ contribution of $6,000 for a total of $24,000. Remember, it’s never too late to start saving for your retirement and I hope a guaranteed 50% return in one month is just the incentive you need!

Medicare Open Enrollment

Medicare Open Enrollment

Medicare open enrollment begins on October 15th and ends on December 7th.  Medicare beneficiaries should take time to do a thorough review of all plans available in 2016.  Many plans have large premium increases for 2016 and some as much as 8%!  If you do nothing then you could easily be paying more than you should.  Below are some points you should consider when deciding which plan is best for you in 2016.

For your Medicare coverage, you have two main choices:

  1. Original Medicare

    With Original Medicare you will want to add a Medicare Supplemental (Medigap) plan and a Part D Prescription Drug Plan.  This option is best if you want to pay a set monthly premium and have little or no out-of-pocket cost throughout the year for medical. You will have copays/deductibles with all Part D prescription plans.  It is advantageous for people to choose this type of coverage when they travel outside of Alabama and for people who want to choose their doctors without needing referrals or being restricted to doctors within a plan network

  2. Medicare Advantage Plan

    With Medicare Advantage Plans you combine Part A, Part B and usually Part D coverage and these plans act as a HMO or PPO. Depending on what plans are offered in your area you can have the choice of a plan with no or very low premiums. With Medicare Advantage plans you share the costs of your medical and prescription care. For example, you will have doctor copays and deductibles each time you see your physician or go to the hospital. Each plan has a different maximum out-of-pocket cost so you should carefully compare the Advantage Plans available in your area for the amount you would pay for copays, deductibles and annual maximums.  You also need to check with your physician to ensure he/she accepts your plan. These plans are best if you are healthy and rarely visit the doctor and you are comfortable knowing you’ll share the costs of all doctor and hospital visits.

Prescription Drug (Part D) Planning

If you are choosing a stand-alone drug plan with original Medicare then be sure to carefully review your prescriptions and choose the best plan that matches your needs.  Be aware of each plan’s preferred pharmacies where drug pricing can be much lower than non-preferred pharmacy pricing. The most expensive plan does not mean it will be the best plan for you.  Be careful when identifying whether you take the brand or generic prescription drug because this can make a significant difference in your drug costs. You can ask your pharmacist or physician for this information.  Some individuals have saved $25 to $50 per month just on their Part D premium by switching to a plan that best fits their needs. But that’s only part of the story… having the wrong plan could cost you thousands in out of pocket drug costs.

If you are unsatisfied with the plan you choose for 2016, Medicare has one option to switch plans outside of the open enrollment period, limited to one change per year.  It is called the 5-Star Special Enrollment Period. Medicare uses information from member satisfaction surveys, plans and healthcare providers to give overall performance star ratings to plans. Plans are rated from 1 star to 5 stars. A 5-star rating is considered excellent. The 5-Star Special Enrollment Period allows you to change to a 5-star plan from December 8th of the current year to November 30th of the next year.  You must have a 5-star plan available in your area to be eligible for a change during the 5-Star Special Enrollment Period. You can see the plans and ratings

You can save thousands of dollars per year in some cases by carefully choosing plans based on your specific health and financial situation. Your best research tool is Medicare’s website where you can input your personal data and they’ll help analyze which plan is best for you.

Kimberly Reynolds, MS, CFP®, is a partner at The Welch Group and has special expertise in the area of Medicare and Social Security benefits and serves as a guest writer for this post.