By Rick Hellberg, ChFC®, CLU® and Michael Diaz
We know that the path to retirement is not always smooth, but with an abundant, glorious retirement waiting for us on the other side, it’s worth it, right? But did you also know that the post-retirement road requires some prep work, some heavy lifting per se, to ensure that it’s the retirement you dream of?
In Rick’s book “Retire Abundantly”, he outlines the obstacles that can get in the way of enjoying an abundant retirement. In one of our recent articles, we discussed the first 6 obstacles many of our clients encounter when they reach their career finish line. Now we’ll finish out that discussion by sharing the final 6 hurdles you want to avoid! Details on how you can get a personalized copy of “Retire Abundantly” are available at the end of this article!
7. Not Passing Along Core Values
Building wealth to provide for and pass on to your family can take decades of hard work and sacrifice. And while leaving an inheritance is a very commendable desire, many of our clients would rather pass on their core values and family history. Many of our clients don’t like discussing the one-dimensional topic of leaving an “inheritance.” Rather, they embrace the idea of leaving a “legacy” because it captures what really matters in life, like family traditions, history, life stories, values, and wishes.
Make sure you’re doing more than just leaving money and assets behind for your heirs. The best way to retire abundantly is to tell your story and share your values with the next generation. This works to both create a common history that each family member can remember with pride, as well as build a common vision of the future that the family can work toward even after you’re gone.
8. Fairness Among Heirs
It’s no secret that wealth can cause conflict in families, especially when spouses, children, or siblings feel they are not getting their fair share of the pot. The prevalence of blended families, where the surviving spouse is not the parent of some or all of the deceased spouse’s children, adds a new level of difficulty to achieving dispute-free planning.
This can be a major obstacle to the worry-free retirement you’ve been working toward. But there are ways to reduce and hopefully eliminate potential disputes between heirs. Firstly, don’t just draw up a will or other estate planning documents and then put them in a drawer, leaving the details to be discovered by family members after you have passed away. That can lead to unhappy surprises and squabbles among family members. Instead, it’s important to let your adult children in on the details of your estate plan while you’re still able to discuss your wishes and adjust as needed.
If one of your children is much more financially secure than the other and your giving reflects that, it’s better to explain your reasoning while you still can. Similarly, if you’re leaving substantial money to a cause or a loved one outside the family, let your family know now.
If your estate includes substantial hard assets (such as jewelry, art, or real estate) that are hard to divide evenly and may hold sentimental value, talk with your children about who may want the items or if it makes sense to simply liquidate them. These discussions can help limit disputes after you pass away and maintain family harmony.
9. IRS Tax Traps & Penalties
Taxes are such an obstacle to an abundant retirement that they’re on the list twice. In addition to the increasing tax burden for high-income earners, there are also other IRS tax traps and penalties to watch out for. These often come in the form of penalties associated with early retirement withdrawals, required minimum distributions (RMDs), and estate taxes.
Knowing the difference between legal tax avoidance and illegal tax evasion can save you a lot of money in retirement. RMDs are mandatory distributions from certain qualified retirement accounts that must begin once you reach age 72. If you don’t actually need the funds to live on, making withdrawals can cause you to miss out on a lot of investment growth and will substantially increase your tax liability. And let’s hope you don’t make a mistake on the amount you’re supposed to withdraw. If you do, it’s a 50% penalty to Uncle Sam. That doesn’t even include the penalties associated with withdrawing your funds early (before age 59.5), which costs Americans an average of $5.7 billion annually! (1) Proactive planning can help you avoid unnecessary RMDs by taking advantage of rollovers and Roth conversions and unnecessary penalties by utilizing other sources of income instead of withdrawing from retirement assets early.
Estate taxes are another burden to an abundant retirement. At 40% of all taxable assets, it’s crucial that you have your estate documents in order to avoid this hefty cost. There are many ways to reduce or eliminate your estate tax liability, but proactive planning is a necessary first step.
10. Lawsuits & Litigation
There are 40 million lawsuits filed in the United States every year. (2) That’s 769,231 lawsuits filed every week! In this increasingly litigious world, you never know when a chance encounter or an accident might end in a lawsuit that could cost you your entire life savings. Make sure you are thoroughly protected by staying up to date with homeowner’s insurance, umbrella liability, comprehensive auto, and business or professional liability insurance. This could mean the difference between losing everything and being able to retire abundantly.
11. Semi-Do-It-Yourself Planning
As a high-income earner, you’ve worked hard to build your wealth and get to a place where you can retire abundantly. The natural tendency is to apply your life skills to the management of your finances by adopting a do-it-yourself (DIY) mentality. Why pay for a service when you could just figure it out on your own? It’s a reasonable question to ask, but it’s not one that should be applied to your finances.
It’s not that the topics are beyond comprehension, it’s just that most individuals do not have access to the same tools, technology, education, and years of experience available to financial professionals. These tools make tracking, implementing, and projecting the overall state of your financial plan much easier and much more accurate. Meaning that no matter how hard you try to DIY your financial plan, you are still less likely to achieve the same level of success as a professional. You simply don’t know what you don’t know. But at PeterAlexander we know it because we do it every day.
Don’t let your knowledge blind spots and insistence on DIY planning affect your ability to retire abundantly.
12. Trusting the Wrong Sources for Wisdom & Advice
Our society has become increasingly dependent on getting news through social media. Whether it’s Facebook, Twitter, or Instagram, people often trust advice from the random sources they follow online, many of which are not necessarily qualified or reputable when it comes to financial matters. In today’s age, the way to make money online and on TV is through clicks and views. The best way to get clicks and views is often through fear-mongering and greed. So while you think you are watching the news for education, you are really watching strategically picked programming designed to keep you scared and nervous enough to come back for more, believing that somehow the fear-mongering is making you better off. But you have the power to get better results and break this cycle. Retiring abundantly starts with taking control of your finances and not letting pop culture and clickbait sources dictate what you do.
Your Abundant Retirement Is Waiting!
If you’re facing some of these obstacles, know that you don’t have to navigate them alone. Your abundant retirement is worth the attention. At PeterAlexander, we believe your abundant retirement is worth the attention and we can help you get there. To learn more and for a free
personalized copy of Rick’s book Retire Abundantly, reach out to us at 610.940.1441 or firstname.lastname@example.org.
Rick Hellberg is president and CEO of PeterAlexander, a financial planning firm founded in 1991. Rick is passionate about providing quality, objective financial solutions so his clients can pursue their financial goals and create the legacy they desire. He strives to equip his clients with comprehensive financial services and advice so they can be empowered to make sound financial decisions. The plans Rick and his team develop help their clients to reduce their taxes, educate their children, fund their retirements, pass their businesses on at fair value, and create programs to attract and retain valuable employees, all so that they can focus on what matters most to them. Rick has a Bachelor’s degree in Liberal Arts from Penn State, along with the Chartered Financial Consultant® (ChFC®) and Chartered Life Underwriter® (CLU®) certifications. He has spent over 40 years working with successful individuals and designs tailored solutions to meet his clients’ unique needs.
Rick resides in Philadelphia with his lovely wife, Lisa, and their two Shiloh Shepherds, Bentley and Winston. He is also the very proud father of two wonderful young men, Peter and Alex. In 2010, Rick ran for Congress in the 2nd District of Pennsylvania and has stayed active in local politics. To learn more about Rick, connect with him on LinkedIn.
Michael Diaz is a financial advisor at PeterAlexander with over 15 years of industry experience. Michael is passionate about helping people overcome financial challenges and avoid potential pitfalls so they can focus their time and energy on the most important things in their life. He spends his days working with successful business owners and families, implementing investment and tax reduction strategies to maximize their wealth. Michael’s goal is to help protect his clients’ financial security, putting them first and helping them navigate every stage in their financial journey. Michael earned his Bachelor of Science in Commerce and Engineering from Drexel University. When he’s not working, you can find Michael traveling, cheering on local sports teams, and exercising outdoors. Michael loves spending time with his wife, Abby, and their baby girl, Monroe. To learn more about Michael, connect with him on LinkedIn.