Retirement Income Planning in Orlando

Preparing for the Future in Orlando

Are you planning to retire? To make your retirement possible, you need to establish a retirement income. In retirement, you are no longer drawing a regular paycheck from work. Instead, you are drawing income from the savings you have accumulated prior to retirement. In essence, your focus has shifted from accumulating wealth to spending it. This is a major transition that requires specialized retirement income planning and good retirement advice. As one of the best investment firms, Nelson Financial Planning has financial advisors that can guide you through the retirement accounts process and help simplify the retirement savings process.

Your retirement income can be affected by your:

• Age
• Debt
• Income
• Expenses
• Investments
• Prior compensation

Taking the Necessary Steps

There are a couple of necessary steps that you need to take to establish your retirement income. The first step requires that you determine the tax nature and prior earnings that you have accumulated for retirement. A 401k plan and 403(b) accounts have more restrictive tax withholding rules and beneficiary options than Individual Retirement Accounts (IRAs).

Depending on your age, income from a deferred compensation plan has lower tax implications than IRAs. Regular investment accounts have lower tax implications than IRAs. In retirement, you want to maximize income from those accounts with the least tax implications so you can keep more of your retirement income to spend.

Start Looking at Your Expenses

The second step is to review the unique expenses that occur in retirement. These “additional” expenses often get overlooked in normal retirement planning. In retirement, you have more “free” time than you had when you were working. When you have “free” time, you are more likely to travel, play golf, or enjoy your hobbies. These activities require money and you need to plan for these extra expenses when you begin planning your retirement.

In addition, you will most likely be paying for your own health insurance. The cost of health insurance is a significant “additional” retirement expense that needs to be taken into consideration.

Next, an analysis needs to be done on outstanding debt that you have prior to entering retirement.

The most common forms of debt that are often overlooked include:

• Mortgage
• Student loans
• Credit card debt
• Car or vehicle loan

Social Security & Retirement

A portion of your retirement income will most likely come from Social Security. The decision of when to take Social Security is based upon a variety of factors such as age, work history, spouse’s work history and continued earnings. The decision is even more complicated for a married couple who can collect on each other’s previous work history, pension plan and retirement benefits. Once we have gone through these first few steps, we can then calculate your projected tax liability in retirement. We do this by thoughtfully examining the amount of retirement income you need and the nature of the taxes on the income you would be receiving.

One of the most intricate and confusing parts of this process is determining your Social Security benefits. Your benefits can either be excluded from taxation or included at up to 85% of your overall benefits. This inclusion as income is a function of the total taxable amount of your other retirement income. Depending on what that amount is and where it comes from, it is often possible to minimize the taxation of your Social Security benefits. Remember, in retirement you still have to pay Uncle Sam his share but the more you keep from him the more you get to spend!

Examining Your Investment Portfolio

The next step in the retirement income planning process is to review your total overall investment picture. Our financial advisors compare this with the amount of total retirement income needed and begin retirement advice accordingly.

By examining your overall investment portfolio, we can:

• Determine if you need to adjust your expenses or your investments
• Figure out whether your retirement plan is accurate
• Discuss whether you need to find part-time employment in retirement

In addition, we review the actual allocation of all of your investments in order to ensure they are properly positioned to generate the necessary retirement income. This allocation is based not only on the underlying performance of the available investment options, but also on an individual’s risk tolerance, time horizon, goals, and objectives. Some of these investments must also be allocated to provide for underlying growth in order to keep up with inflation in retirement. This is particularly important because retirees often experience a higher rate of inflation than the general public due to their consumption of health care.

We’re Here to Help!

If all these steps seem complicated, they are! Providing independent personalized retirement income and estate planning solutions is an intricate process. If you would like to schedule a free consultation to review or prepare your retirement income plan, please contact our office at (407) 629-6477 today!

Retirement Income Planning FAQs

How much money do I need to retire?

Knowing exactly how much money you will need to retire comfortably differs for everyone. The general guideline is that you will need anywhere from 70%-90% of your pre-retirement income when you retire. Other factors that will help our financial planners determine an accurate figure for retirement include how much you will spend in retirement, how much you will earn on your savings, how long you will live, and how much you can withdraw from your savings each year.

How will my tax bracket be affected after I retire?

Your taxable income determines your tax bracket. Typically, people don’t make more taxable income in retirement than they do during their working years, so it is unusual for people to be put into a higher tax bracket during retirement. However, even if you’re taxable income is less in retirement than when you were working, it is still possible that you could remain in the same tax bracket once you retire.

When does the average American retire?

Most Americans typically retire between the ages of 62 and 68. Your full retirement age to receive Social Security benefits is based on the year you were born. While some people may choose to retire before their full retirement age, their Social Security payouts are reduced for their lifetime if they start taking them before their determined full retirement age.

What age is considered early retirement?

Retiring before the age of 62 is usually considered early retirement. However, your full retirement age for Social Security benefits is determined by the year you were born.

When should I start planning for my retirement?

It’s never too early to start retirement planning. The sooner you begin planning, the more likely it is you’ll be able to retire the way you want. No matter your age, salary, or occupation, Nelson Financial Planning would be happy to help with financial and retirement planning in our Orlando office.

How much should I be saving each month for retirement?

If you can contribute to a company-sponsored 401K program, you should contribute at least the minimum to earn your company’s match if they offer one. How much you need to save for retirement to maintain your current lifestyle will depend on how soon you start saving.

What is the best way to invest retirement money?

The best investment strategy will depend on the age of the investor. At Nelson Financial, we will also look at risk tolerance and overall asset allocation. The sooner you start investing the less risk you will need to take later on in life. For investors between 20 and 40, you should take an aggressive growth approach to investing since you have time on your side. Between 40 and 50, that approach should start to be less aggressive. Once you are in retirement the investment mix should further shift to be growth and income oriented so you are able to get income while having enough growth to support the retirement income.

What is the average cost of health insurance for a retiree?

At age 65, you are eligible to receive Medicare. However, many retirees elect to purchase additional policies for complete coverage. If you retire before the age of 65 before you’re eligible for Medicare, health insurance can cost thousands of dollars per year.

What percentage of my retirement living expenses will social security cover?

Social Security benefits probably won’t cover more than 25% of “average” living costs. However, with all retirement planning questions, the most accurate answer will depend on your retirement age, how much you have accumulated in Social Security and your cost of living in retirement.