Tag: retirement plan

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Where to Retire?

Photo: Mehdi Mirzaie | Unsplash

One of the greatest freedoms of retirement is the ability to live wherever you want. But your choice can have a big impact on your lifestyle and budget, so it’s important to choose wisely. Here are six considerations as you decide on a locale. 

1. Cost of living

The amount you pay for daily living expenses can vary between different cities and states. By choosing a location with a more affordable cost of living, you may be able to do more in retirement, such as travel, pursue hobbies, and purchase a nicer home. Be sure to consider expenses beyond just housing, utilities, and transportation. You’ll also want to consider food and groceries, entertainment, and recreational activities. 

2. Healthcare availability

During early retirement years, you may not need to worry much about healthcare. However, as you age, it may become more likely that you need access to quality healthcare and, potentially, long-term care. Consider the quality and availability of healthcare and evaluate the availability of good doctors, hospitals, senior living facilities, and long-term care facilities. 

3. Taxes

The amount you pay in taxes can have a big impact on the lifestyle you’re able to afford, which is why it’s important to consider how much of your retirement income may go toward paying Uncle Sam. Evaluate the impact of the following taxes as you consider your retirement location:

• State income taxes: Different states impose different tax rates on retirement income. 

• State tax on Social Security benefits: There are nine states that tax Social Security benefits (Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont). Regardless of where you live, up to 85 percent of your Social Security income may be subject to federal income tax. 

• Taxes on retirement plan distributions: Assets held in tax-deferred accounts, such as traditional IRAs and 401(k)s, are subject to federal ordinary income taxes when withdrawn in retirement. However, some states don’t tax these distributions, which can help lower your tax exposure.

• Pension income: Some states differentiate between public and private pensions and may tax only public pensions. Other states tax both, and some states tax neither. Again, the amount of state tax you pay on this retirement income source can have a big impact on your lifestyle. 

• Capital gains: Long-term capital gains are subject to more-favorable federal tax rates than ordinary income. However, many states don’t differentiate between earned income and capital gains, which means, depending on where you live, you may face significant tax liabilities on your investment income. 

• Estate taxes: In 2024, the federal government allows individuals to pass on up to $13.61 million without any federal estate tax ($27.22 million for married couples filing jointly). However, depending on where you live, your estate may be subject to state taxes. 

• Property taxes: Property tax rates vary significantly from state to state, and even between counties. Depending on which state you live in, you may be eligible for a property tax exemption (which can add up to big savings over time). 

4. Leisure activities 

How do you envision spending your free time once you retire? If you’re an avid golfer, it’s probably important to live in a location with ample golf courses and a moderate climate. If you hope to hit the slopes on a regular basis, mountains and snow are likely essential. While finding an affordable location is important, it’s just as vital that it meets your lifestyle needs. 

5. Climate

If you’ve ever felt the impact of seasonal affective disorder, you know how big an impact a location’s climate can have on your mental health. Once you’re retired, you may have fewer responsibilities to occupy your time, which can give you more freedom to enjoy the outdoors. Be sure to choose a location with a climate you enjoy. 

6. Family and friends

Some retirees choose to move closer to their kids and grandkids, while others prefer the social aspects of an active adult community. Choosing a location with an adequate amount of social interaction can help you avoid loneliness and isolation in your retirement years. 

Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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How to Cover Retirement Living Expenses

Photo: Diana Parkhouse | Unsplash

Congratulations! After years of planning and saving, you’re finally nearing retirement! This stage in life comes with a mix of emotions, but with planning, you can turn your savings into a source of income to cover your living expenses. Here are four tips to help you plan for income in retirement.

1. Make a plan.

The first step is to have a comprehensive financial plan. A custom financial plan serves as a blueprint to inform your financial decision-making and ensure all aspects of your financial life are working together to achieve your goals.

A solid plan puts you in control of your financial future and provides you with the confidence of knowing you have a plan to generate retirement income.

2. Properly structure your portfolio.

One of the best ways to generate income in retirement is by striking a balance between short- and long-term investments.

We typically recommend maintaining three to five years of living expenses in a short-term, semi-liquid investment account. A mix of bond funds typically works well, as it provides capital for opportunistic rebalancing as well as a monthly income. Having a short-term allocation to bonds can prevent you from being forced to sell out to equities at a loss when markets are low.

It’s also important to continue growing your assets throughout retirement in order to help offset inflation and ensure you have enough income to last. We often recommend investing any assets not necessary to fund short-term needs in a diversified portfolio that focuses on growth and inflation protection. While this portfolio should be in line with your overall risk tolerance and investment objectives, it can be invested in riskier assets than your short-term account. Throughout retirement, you can identify opportune times to transfer assets from your long-term savings to your short-term savings in a tax-efficient manner.

3. Implement a tax-efficient withdrawal strategy.

Ideally, you’ve been saving in multiple accounts with different tax treatments, such as traditional IRAs, Roth IRAs, 401ks, and taxable accounts. If so, you may have an opportunity to maximize your retirement income by strategically withdrawing from different accounts in different circumstances. We call this tax diversification.

• Taxable (non-retirement) accounts: These accounts offer the benefits of tax-loss harvesting and have fewer restrictions on contribution amounts as well as fewer distribution penalties.

• Tax-deferred retirement accounts, such as pre-tax IRAs and 401ks: Withdrawals from these accounts trigger ordinary income taxes, as they’ve enjoyed tax-deferred growth.

• Tax-exempt accounts, such as Roth IRAs: These accounts allow tax-exempt investments to grow for as long as possible, and qualified withdrawals are tax-free.

There are two main withdrawal strategies to consider based on your specific goals, tax situation, and income needs.

• Traditional approach: You would withdraw from one account at a time. Typically, the order of withdrawals is from taxable accounts first, followed by tax-deferred accounts, and, finally, tax-exempt accounts. This allows the tax-advantaged accounts to continue growing tax-deferred and tax-free for a longer time. However, it may result in uneven taxable income.

• Proportional approach: This strategy establishes a target percentage that will be withdrawn from each account each year. The amount is typically based on the proportion of retirement savings in each account type. This can help ensure a more stable tax bill and can also help you save on taxes over the course.

The benefit of following a disciplined approach is that you won’t be tempted to spend more than you can afford. This can help you maintain adequate assets to last a lifetime, regardless of market volatility. An advisor can assist you with creating a distribution strategy aligned with your financial needs and tax bracket, whether through a traditional or proportional approach or some combination of the two.

4. Regularly revisit and readjust.

Given the potential longevity of retirement, periodic reviews of your financial plan and income strategy are essential. You don’t have to do it alone — a qualified wealth manager can help you understand how regulatory and market changes may impact you, and adapt your plan as needed to align with your evolving goals.

Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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U of M Puts Halt on Proposed Retirement Plan Change for Temp Workers


This Friday, six days before Christmas, a two-week layoff period will begin for temporary workers at the University of Memphis. They will have the opportunity to reapply for positions on or after January 5th.

In addition to the layoffs, temporary workers were informed earlier this month that the university would cease from contributing funding into their Social Security retirement plans. Rather, they would have workers enroll into a separate “temporary employee retirement plan.” 

The proposed change in coverage received negative feedback and opposition from workers. And Wednesday afternoon, the university’s Human Resources office sent out a message informing workers that the U of M will refrain from implementing the change until further notice.

If enacted, the alternate plan would mandate temporary workers to contribute 7.5 percent of pre-taxed wages into a private retirement fund. The university wouldn’t contribute anything into the fund.

However, the university and employees would continue to contribute the 1.45 percent Medicare tax into Social Security. 

Presently, temporary workers and the university equally contribute 6.2 percent of their earnings into Social Security.

“As is often the case with privatization schemes, the numbers don’t add up,” said a representative from the United Campus Workers. “Implementing this plan would be horrible for Social Security and Mid-south seniors, pillaging potentially a million dollars a year from the Social Security trust fund. And the plan would be a real raw deal for the workers. [The] 401(a) retirement accounts under-perform Social Security on returns and reduce the percentage of workers’ wages invested in retirement from 12.4 percent (6.2 percent employee funded and the matching 6.2 percent university funded portions) to 7.5 percent — funded solely by the employee. The chart [Human Resources] gave to employees was misleading, leaving out the employer-funded portion of Social Security and unethically presenting this policy as beneficial to the employees.”

According to the U of M, the retirement plan change would enable temporary workers to have full control of the investment options within their retirement plan. They would also be eligible to withdraw retirement funds upon separation from employment.

A PDF of a chart provided by the university’s Human Resources office regarding the temporary employee retirement plan can be clicked and viewed below.

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