Retirement Planning: Step 5 Now Check Seriously: You Are Nearing Retirement
John Rukosky
of Rukosky & Associates
We believe there is a critical difference
between our firm and others that
perform only financial planning:  while
others will refer you to a tax advisor
after having designed a financial plan
for you, at Rukosky & Associates
Financial Group Inc.  you are
consulting with a tax accountant, so
we know your plan will succeed.
Contact us:
508 Driewood Court
Raleigh, NC  27609
Office:  919.781.9319
Mobile:  919.906.4234
Fax:  919.791.0990
Email: john@rafginc.com

The Retiree Timeline:  

Age 50:  Life happened and you’re behind in the amount you need for
retirement. Begin making any catch-up contributions to your investments.

Age 59 and ½:  There are no more penalties for withdrawals from your
retirement savings. But leaving them in there means they have more time to
grow.

Age 62:  You are eligible to take early Social Security benefits. But you will
get a larger monthly benefit if you delay getting that check for a few more
years.

Age 65:  Eligible for Medicare benefits.

Age 66: If you are born between 1943 and 1954, you are eligible for your full
Social Security benefits.

Take Stock:  Income and Expenses

Sit down with some paper and a pen and write down what resources you
currently have for your retirement years:

Work-related retirement savings:  401(k), 403(b), 457, Keogh, SEP, and
SIMPLE plans

Traditional and Roth IRA’s
Home Equity:  the market value of your home minus how much is left to pay
on your mortgage. By the way…please don’t assess your home by the, “Bill
down the street sold his house for $200,000 so mine must be worth that too,”
appraisal. Get the phonebook out, choose an appraiser, and pay the money
to get your home appraised. You have to know how much equity you have in
your home or you are back to guessing whether you can safely retire or not!

Personal savings and investments

Collectibles and other assets

Cash value life insurance (not the death benefit…the cash value)

Now start taking stock of your expenses. And not just the mortgage and the
utility bills. I mean, write down everything that you are doing today that you
will want to continue doing in your retirement (if you are giving money to
charities, or you are a smoker and don’t intend on quitting, or if you go
camping three times a year and want to keep doing that when you retire). Be
extremely detailed about this.  

Once you have the list, delete (1) any expense that is work-related because….
well, you’re retiring, right? That means gas to and from work. Lunches. The
lottery pool. And, (2) any expenses that won’t exist…like auto loans, or
mortgages, etc.

Ok, got it? Good! Now, we don’t have to inflate those expenses because we
made a big assumption earlier:  we projected what we needed to save by
retirement time on the basis of what our salary was today, right? And if we
assume that our income today is supporting our expenses today, we can
assume that our income tomorrow will support our expenses tomorrow, right?
Pretty close.

Chinks In the Armor

(1) Now that you deducted work-related expenses and mortgages, auto loans,
etc., see if the amount you deducted is equal to the 10% less salary that you
projected not having.  If not, you won’t be able to support your current lifestyle
when you retire.

(2) Consider that about 20% of your retirement funds will be spent on health
care. Sounds like a lot? It isn’t. Consider that we’re living much longer than
our parents did. Consider that a 25 year old can look forward to living until he
or she is about 96. Take the following into consideration:  medical insurance
costs, Medicare supplement policy costs, drugs, office visits, and
hospitalization. Also, include in your medical insurance costs the cost for
long-term care insurance, if you don’t already have a policy. Why do you need
one? Because one out of two retirees over the age of 65 will need long-term
care for a period of about two and one-half years, at a cost of about $70,000 a
year (today!)

(3) Estate planning:  “I don’t have an estate,” I hear you say. Either did a
client of mine, he thought, until I told him that his 150 acres was worth $7.5
million. Unfortunately, the federal estate tax exemption, this year, is only
worth $2,000,000. That means if he dies his children will have to pay federal
and state death taxes of approximately $2.75 million….in nine months. He
opted for the life insurance policy.  

So, figure some estate planning costs (and possibly some life insurance
costs) into your retirement savings.

Conclusion

We’ve gone over a lot of information in this chapter. But this is what it takes.
And it’s worth it. The alternative is looking at your wife and saying, “We can’t
retire where we want to. And we can’t buy what we want to buy. And, by the
way, do you like peanut butter?” Ugh.