Answering Your Questions About “Timing” the Retirement Transition

We received very positive feedback from folks who attended our most recent educational webinar, "Timing is Everything." And, we also received some excellent follow-up questions that we're going to address on today's episode. Our conversation ranges from transportation costs to health insurance and asset allocations. We also discuss what we mean by “timing” in retirement and how Keen Wealth’s comprehensive planning process prepares folks for the best half of life.

1. "Is it true that vehicle usage tends to decrease after retirement due to lack of a commute?"

In general, yes. But you might offset some usage savings if you drive more for vacations, recreation, or to visit friends and family. Working couples also might downsize how many vehicles they own or lease in retirement, which creates some additional savings as well.

2. Do we need to replace the old 4% rule with a 5% rule?

The 4% rule is a back-of-the-napkin way to estimate how much of their nest eggs retirees can spend every year with the objective of never running out of money. We've discussed the limitations of this rule in previous blog posts and podcasts, but I think what this question's really addressing is inflation and interest rates. And no, we would not advise retirees to raise their planned withdrawal rates to account for rising prices and a slightly higher return on your savings.

Regardless of what's happening in the broader economy, a better question is: What's your goal for your nest egg? Do you want to make sure you don't run out of money? Do you want to spend all the way down? Do you want to cross everything off your bucket list? Do you want to leave behind a legacy for your heirs? A combination of several goals?

Answering these kinds of questions with the help of your advisor could lead you to a much more thorough withdrawal plan that's also flexible enough to adapt as your life changes in retirement.

3. "What is the best way to encourage children to start their own retirement planning?"

Cut them off.

Kidding!

Sort of.

If you have kids or grandkids in their mid-20s who are still on your cell phone plan, driving one of your cars, or borrowing your Netflix password, we have some excellent resources on having "adulting" conversations. There's such a fine line between helping the next generation and hurting your own retirement plan. Even small monthly charges you don't think about can add up quickly.

We also encourage clients to bring younger family members to Keen Wealth. Sometimes advice about the importance of planning early just hits differently when young folks hear it from a financial professional. We're happy to discuss the challenges and opportunities young people are facing and point your loved one down the path to financial success.

4. "How should retirees plan for healthcare needs, especially if they retire before they're eligible for Medicare?"

Folks who retire before age 65 generally have three options to bridge the gap to Medicare:

·   Jump on a working spouse's health care plan.

·   Sign up for COBRA to keep your current plan from your former employer.

·  Purchase insurance from your state's marketplace.

Those last two options have to be carefully accounted for in your spending plan: COBRA costs 102% of your current plan's full monthly premium, and marketplace insurance prices are based on your annual income.

Married couples should also keep in mind that once both spouses are retired, you'll each need to sign up for individual Medicare plans that suit your specific needs.

5. How does Keen Wealth Advisors change one's investment allocation over time?

Generally, as folks get older, we shift a higher allocation of their assets into more conservative investments. In most cases, that could mean putting 5-10 years of income needs into a fixed income allocation. However, we do work with folks who have a higher tolerance for market risk, or who want to keep earning more money on investments so that they can leave a larger estate to their heirs. We also make proactive strategic rebalancing moves at certain times and especially during periods of volatility. Finding that balance between keeping you safe and secure as you age and continuing to meet your retirement goals is all part of the ongoing planning process.

6. "Your webinar was called 'Timing is Everything.' How can that be true if you can't 'time' the markets?"

No one can accurately "time" the markets because no one can predict the future 100% of the time. There's no bell that rings when the markets are at a peak and then again when it reaches the trough. Folks who panic during volatility and pull their investments, thinking they'll jump back in when the markets are "good" again, are only missing out on the wealth they'd be building when the markets do recover. Which, history tells us, is what usually happens.

When we talk about "timing" retirement at Keen Wealth, we mean helping seniors have a smooth transition away from working and into their golden years. We're not timing the markets, we're timing Social Security benefits, health care coverage, an annual withdrawal rate, and all the other factors that go into supporting a fulfilling retirement.

Thanks again to everyone who attended our webinar. If you missed it, you can click here to watch a replay. Also consider signing up for our mailing list and we'll let you know about upcoming events. And if you have any questions about financial planning or retirement that you'd like us to address in a future blog or podcast, don't hesitate to email me at bkeen@keenwealthadvisors.com.

About Bill

Bill Keen is a financial advisor with nearly 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

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