Keen On Retirement

A great many of the successful clients we're privileged to work with at Keen Wealth weren't born wealthy. They've grown their nest eggs, dollar by dollar, over years of hard work and diligent financial planning. As they're nearing retirement, these folks aren't just thinking about what life without work is going to be like -- they want to preserve their wealth to support them throughout their golden years and to build a lasting, inspiring legacy. Affluent seniors can use these five principles to start making their plans to enjoy, maintain, and even maybe grow their assets in retirement.

While inflation has generally improved in the past year or so, folks are still paying more for goods and services than they're used to. From a financial planning perspective, this short-term experience of above-average inflation has some valuable long-term lessons for seniors: throughout the course of your retirement, you should plan to cover rising prices every year as you're living off a relatively fixed income. The Federal Reserve tries to maintain an inflation rate increase of 2% per year, which it believes translates to a more stable economy. And even in years when inflation rates are below that target, modest upticks in costs will continue to compound and grow year over year. Let's take a look at how inflation typically affects three top-line retirement spending categories and how comprehensive financial planning can give seniors the resources they need to adjust to rising costs.

Most soon-to-be retirees have a broad understanding of the differences between living off their assets and living off a monthly paycheck. But making that switch and adjusting to new spending habits can be more complicated than you might think, especially if you aren't prepared for the rules around withdrawing from your retirement accounts and how your relationship to your money might change. In his most recent webinar, Matt Wilson, CFP® Chief Investment Officer and President at Keen Wealth explained the importance of making a plan for your retirement spending before you actually retire. Today's episode touches on some of the topics that Matt's webinar covered in depth, as well as important follow-up questions we received about budgeting, required minimum distributions, and managing the psychological and emotional challenges of retirement.

As a retiree, you might be done cashing a regular paycheck. But, as far as the IRS is concerned, you probably aren't done earning income or, in most cases, paying taxes. In fact, without precise planning around how and when you start tapping into your nest egg, you could open yourself up to higher tax liabilities in retirement than you had when you were working full time. Here's a very basic example of a retirement withdrawal strategy checklist that we use at Keen Wealth to help retirees minimize their taxes and maximize their resources for living a full and rewarding retirement.

Are you planning to spend more money or less money once you retire? Many retirees would answer, "About the same," and that makes sense. Folks figure that what they end up saving in professional expenses (commuting, meals, work clothes) and childcare, they'll shift over to things like taking vacations, joining their local country club, and some quality-of-life upgrades around the house. Sure, inflation will drive up the cost of some goods and services by a percent or two every year. But most seniors aren't looking for a lifestyle upgrade in retirement, and they want to avoid any serious downgrades. Maintaining the status quo, with a few well-earned splurges here and there, sounds like a dream. Financial professionals and economists used to assume consistent spending was, more or less, a likely retirement scenario as well. But decades of research and analysis have uncovered a "retirement consumption puzzle." Most new retirees actually spend less money than they did while they were working. Retiree spending rates then continue to decline throughout retirement, even as inflation keeps pushing consumer prices upwards. Let's break down the retirement consumption puzzle piece by piece and explore how Keen Wealth's comprehensive planning process can help folks assemble a reliable retirement spending plan.

Organizing expert Marie Kondo encourages folks to look at their stuff and ask, "Does this spark joy?" The Swedes have a slightly less sunny spin on decluttering: döstädning, or, "death cleaning." As popularized in both a bestselling book and a Peacock reality show, death cleaning is a way for older adults to streamline their possessions so that their heirs won't have to when they're gone. “A loved one wishes to inherit nice things from you,” writes author Margareta Magnusson. “Not all things from you.” But “death cleaning” and the KonMari Method aren't just about clearing out your closets and saving your kids some hassle. Organizing your possessions and your home can have a liberating effect on how you live in retirement and how you plan for your legacy.