How Prepared Are You For Retirement?

You My name is Brian Scribonia, and on this episode of the Common Sense Financial Podcast, these buckets aren't just labels. They represent a strategic framework for ensuring your money works together seamlessly to support your life, your goals and your dreams. And to achieve that, you need a system that organizes your assets with purpose. That is why organizing isn't just helpful, it's essential. When your assets are organized with the purpose in mind, you gain more than financial security, you gain peace of mind. You know where your money is, what it's for, and how it fits into the bigger picture of your life.

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Opportunities are still there. The attempt at passing down wealth from generation to generation. Consider the outcome, not just popular opinion.

And the whole teaching there is about preparedness and being ready.

There's a difference between what's real and what's true. You're listening to the Common Sense Financial Podcast. I'm your host, Brian Scribonian. Thanks for tuning in and let's get into today's topic. Imagine, after years of saving and working hard, you finally reach a point that you're able to retire. You're feeling like you are on an extended vacation, not worrying about the Monday blues or the responsibility of your job. For many people, that is the focus that point of being able to exit the responsibility of a job. But it's important to determine whether you have truly retired with a plan in place or if you're really just temporarily unemployed. And I know that may seem a little dramatic to say you're unemployed, but the idea of setting a retirement date before having a well thought out retirement plan, specifically for income, but overall for the rest of your life is really like quitting a job before you have another one lined up. And when you are between paychecks like that, you're unemployed. And this is far more common than one thinks it is. An attitude of retiring Then figuring something out later, they have worked through some napkin math after they took a look at their quarterly statement and using the rate of return for the year as a distribution rate for retirement. Let me just say to you, that is a bad idea. An average rate of return on an investment statement is not the same scenario as taking money from an account over the rest of your life. That is not a shortcut through this entire process. And the point here is that preparing for retirement really should not be planned with an accumulation mindset. And that's where most people are. They've spent their whole life accumulating money. It's different. And it's not really a time to try to DIY without understanding all the moving parts. You most likely have blind spots. And you won't be blind to everything until later on when a problem may present itself. So retirement's a big deal and is more than just a financial milestone. It's a complete shift in how you use money and approach life. And in my experience, many people walk into retirement unprepared, mostly relying on optimism rather than having a solid plan in place, and just hoping things work out. But hope isn't a strategy. I've talked about this many times before on other shows. Retirement isn't just about having money in the bank or having an investment account. It's about understanding how that money converts into consistent, reliable income that is going to be able to support your lifestyle for decades. Retirement really is like a hard 180 degree shift from accumulation to income. And that's where the challenge begins in most people's minds. It's human nature to default to what you know and resist change whether you want it or not, because change is coming. If you want to retire simply because you're no longer working, you're, as I said, unemployed. And nothing is going to be the same. And this isn't a bad thing. Retirement is a great thing, and it can be very good. But you need to be prepared. So if you're nearing retirement, or even just beginning to consider it, it would be a good idea to consider the questions I'm about to pose to learn how your answers stack up. And these aren't just financial curies, they're the foundation for your future. So let's get started. The first question is, do you have a detailed income plan? A lot of people think they've planned their retirement because they have accumulated money and have always made their budget work in the but there's a lot of elasticity to a budget when you're working because you can Always make more money and figure things out. That's not the case in retirement. Like I already said, it's 180 degrees. And an income plan is more important than ever. An income plan is about ensuring you have the resources to meet those expenses. It considers everything your lifestyle goals, inflation taxes you in a straight line and will just simply last forever. They assume inflation won't hit them as hard as it does others. But assumptions lead to gaps. And even a small gap between your expenses and your income can compound into significant financial stress over time. Inflation, just for an example, is often overlooked. A dollar today, of course, won't be worth the same 10 or 20 years from now. That's an issue. Medical costs can skyrocket unexpectedly. And you shouldn't forget about travel and hobbies now that you have more free time. How are those going to be funded? If you haven't taken the time to answer the hard questions about how much you'll need, where that money will come from, and how taxes and inflation will affect it, you're really setting yourself up for a lot of uncertainty. And uncertainty is the last thing you want in retirement. You want cash flow confidence during your working years. The focus, like I've said, is on growth, maximizing returns, building wealth, and accumulating as much as possible. But retirement requires a different mindset. It's no longer about how much you can grow your portfolio. Yes, it's still important, but really it's about how much consistent, predictable income your portfolio can generate. Think of it like this. When you're working, your paycheck funds your lifestyle. In retirement, your assets become your paycheck. If those assets aren't aligned to produce income, you could find yourself in trouble. It all begins with knowing your number. When I sit down with clients, the first thing we talk about is their number. How much money will it take to sustain their ideal retirement lifestyle? This isn't a guessing game. It's a precise calculation. And once we identify that number, everything else really does fall into place. So knowing your number means you're not operating on hope or assumptions. You have clarity. You have cash flow confidence. You know exactly how much you'll need, how much you have, and how to bridge any gaps. This kind of precision is empowering. It gives you confidence to enjoy your retirement without constantly second guessing your financial decisions. And so once you know your number, then next on this list of questions is, have you identified all your income sources? The most obvious income source for most people begins with Social Security. Social Security is often viewed as a cornerstone of retirement income, but it's also one of the most misunderstood. People assume it will cover a significant portion of their expenses. But the reality is that Social Security is designed to only supplement your income, not replace it. And while you may know your benefit amount, do you really know how to maximize it? Understanding the interplay between Social Security and your other income sources can make a huge difference. By strategically timing when you claim benefits and coordinating withdrawals from other accounts, you can help maximize the cash flow and keep more of your money working for you. And if you're fortunate enough to have a pension, congratulations, you're part of a shrinking group. But even pensions, which seem straightforward on the surface, come with decisions that can affect your long term financial health. Many pensions offer payout options such as lump sum or monthly payments. While monthly payments provide stability, a lump sum offers flexibility, provided you have the discipline to manage it properly. Then there's the question of spousal benefits. Making the right choices requires careful consideration of your overall financial picture and long term goals over the remainder of not just yours, but also your spouse's life. Many people choose to work part time to delay benefits or drawing from the resources which can be a meaningful supplement retirement. If you're open to working a bit to make this work, and working part time does go beyond just the financial benefits, continuing to work in some capacity can oftentimes provide a sense of purpose and can help you remain connected to your community. So once these fixed sources are clearly identified, you may find yourself with a gap between your number that we talked about before, which is your cash flow need, and your fixed income sources that's actually providing the cash flow. And this is where the planning becomes critical, because the next step is tapping your savings. And before you simply begin withdrawing money, you need to first know whether your assets are organized specifically with a purpose. This shouldn't be a blind decision when it comes to retirement. The way you organize your assets can make or break your financial stability. One of the most common mistakes I see is treating all assets as if they're interchangeable. I have found this to be a really bad idea. Retirement is a phase where precision matters and every dollar should have a clearly defined role. Without this structure and this mindset, you risk making decisions that could derail even the most well allocated investment portfolios. Let me put it this way. In retirement, your income is pieced together from various sources. So security, investment returns, rental income, perhaps a pension, and other things. And the challenge is that not all assets are created equal. Some are meant to be spent down, some later, and some should only be touched in emergencies. This is where categorizing your assets into what I call the three buckets becomes critical. Immediate income, long term growth, and cash reserves. These buckets aren't just labels. They represent a strategic framework for ensuring your money works together seamlessly to support your life, your goals and your dreams. And to achieve that, you need a system that organizes your assets with purpose. That is why organizing isn't just helpful, it's essential. When your assets are organized with the purpose in mind, you gain more than financial security. You gain peace of mind. You know where your money is, what it's for, and how it fits into the bigger picture of your life. This clarity allows you to focus on what really matters. Spending time with family, pursuing hobbies, traveling the world perhaps. And I've worked with countless clients who say the same thing. Having a plan that aligns their money with their goals lifts a tremendous weight off their shoulders. There's no longer worrying about whether they're doing the right thing or if their savings will last. They're confident, and that confidence allows them to enjoy their retirement to the fullest. If you've reached this point, you're ahead of the curve from where many retirees I speak of are. But the work isn't finished. The next question is, do you have a tax strategy? Taxes are quite the force that can erode your retirement savings faster than you think. They don't make headlines like market volatility or inflation, but the impact can be just as significant, if not more so. Without a proactive tax strategy, you're leaving the door wide open for the IRS to take a larger share of your hard earned money than necessary. And in retirement, every dollar counts. People spend years focusing on how to grow their savings, but they often neglect to consider how much of that money they'll actually get to keep. It's not just about how much money you have saved and what your balance is. It's about how much you get to spend, how much you get to keep. The reality is that the bulk of most retirees savings sits in tax deferred accounts like 401ks and IRAs. These accounts help build wealth during your working years, but are a ticking tax time bomb. Because while the deferral is great, once you start drawing from these accounts in retirement the tax bill comes due. Every dollar you withdraw from a tax deferred account is taxed as ordinary income, which could push you into a higher tax bracket if you're not careful. Not to mention force required minimum distributions come into play. I've worked with clients who were shocked to find that their RMD pushed them into a tax bracket they didn't anticipate. It's not that they didn't save enough, it's that they didn't account for how much tax would impact their withdrawals. Without a strategy, the money you've spent decades saving could be significantly diminished by the time you actually use it. All this is where tax management and mitigation are crucial to prevent sticker shock in future years. There isn't a singular way of going about this, since every person's situation is a bit different, but there are ways to approach this. First is having a plan and knowing what those tax liabilities are now and what they may be in the future. Too many people leave this in the back of their minds, but they seldom take time to do the calculations to understand the significance of the taxes that are owed and develop a plan around them. I see many retirees fearful of the tax bill and they choose to delay the inevitable. They postpone making decisions to ultimately find that the bill continues to increase because their account values continue to decrease, not to mention the unknown future of tax rates. Growth is a good thing, but leaving the tax growing along with it isn't. Most people don't really think about this, nor do they know where to even begin if they come to this realization. Most people will say that a Roth conversion is the answer, and in many cases I would agree. A Roth conversion can make sense, but completing what I would call a naked conversion without a plan for the taxes is foolish and goes against the entire point of the conversation. Tax bracket space is a fundamental part of knowing how much to take to avoid jumping into a higher bracket, which can not only impact your taxes, but can also increase your Medicare premiums and could increase the tax liability of your Social Security benefits. So there's such things like a donor advised fund. These can be utilized to accelerate donations for tax efficient giving. There's oil and gas investments that can be utilized for the tax benefits of the intangible drilling cost. There's qualified charitable donations that can be utilized to bypass the tax return and avoid having to overcome the standard deduction hurdle. Another way to help manage taxes is by strategically timing your withdrawals. This might mean pulling from, you know, taxable accounts first and tax deferred accounts, leaving your Roth IRA for last or mixing it in now. Some of this is age dependent and can be limited if you're not an accredited investor or if you don't have charitable intentions. This is where the personalized planning comes it becomes essential. It's not one size fits all. What works for one person might not work for another. This interconnectedness is why a piecemeal approach to taxes doesn't work. You need a coordinated strategy that looks at the big picture, accounting for all your income sources, expenses and financial goals with a very strict and set timeline for deployment. Taxes aren't just a problem to solve, they're an opportunity to optimize. By being intentional and proactive, you can significantly reduce your tax burden, allowing you to keep more of your money and enjoy the retirement you've worked so hard to achieve. Now, once all these details of the plan are set in motion, we gotta start thinking about what happens to your spouse if you're no longer here. Now, this isn't the most comfortable question to think about, and for many, it's one they'd rather avoid altogether. But here's the hard truth. Ignoring it won't make it any less relevant. If something happens to you, will your spouse be financially secure? Will they have the resources they need to maintain their lifestyle? Or will they be left scrambling to figure out how to make ends meet? When one spouse passes away, the financial impact can extend far beyond the immediate loss of income. For example, Social Security benefits typically decrease. If both spouses were receiving benefits, the survivor often retains the higher of the two, but loses the other entirely. That can be a significant reduction in monthly cash flow from for most families, pensions can pose another challenge. Depending on how they're structured, a pension might stop altogether upon the death of the recipient. If your pension doesn't offer a spousal continuation benefit, or if you opted out of it to maximize your own payout, your spouse could be left without this vital income source. And then there's the tax situation. This is often almost 100% of the time ignored. Filing jointly often results in lower tax rates, but a surviving spouse typically moves into the single tax bracket, which can increase their tax liabilities even as their income decreases. These changes can create a financial squeeze that many people simply aren't prepared for. This is another reason to have a solid tax plan in place to get those taxes under control and not carry that burden deep into retirement. Life insurance can play a vital role in this situation, but too often people assume they don't need life insurance in retirement, and they often forego carrying any benefits. But with life insurance or not, most often there isn't enough benefit to address the long term realities of income loss. A truly comprehensive income replacement strategy does include life insurance, but it does go beyond insurance. It starts by examining all your financial resources and determining how they can be structured to provide ongoing support for the service spouse. This might include pension planning. If you have a pension, you could consider whether it offers a spousal continuation option and whether that option makes sense for your situation. While it might mean accepting a lower monthly payout, the peace of mind it provides can be well worth the trade off. There's some hidden cost in these pension plans, so this isn't necessarily a recommendation to take a spousal benefit, but this is something to consider. If there's also a lump sum option. Opting for an annuity outside of the pension with a joint benefit could be a much better consideration for increasing the potential benefits. Then you have Social Security Optimization the timing of when you or your spouse claims Social Security benefits can significantly impact the survivor benefits. A strategic approach can help maximize the amount your spouse receives after your passing. Also having passive income streams. This is like rental properties, dividend paying, alternative investments, or other income generating assets can provide ongoing cash flow that continues regardless of life's uncertainties. These assets can serve as a financial safety net, ensuring your spouse has a steady stream of income that they can rely on. Then you have the growth bucket of your retirement plan. While it wasn't originally designated for income, having these resources set aside for the future can be a significant infusion of capital to help formulate a new retirement income stream for that surviving spouse. When it comes to this level of planning, it's rarely about the numbers. It's about what those numbers represent. Peace of mind. Dignity. The ability to maintain a sense of normalcy during an incredibly difficult time. It's about ensuring your spouse won't have to make a drastic lifestyle change or face tough financial decisions when they're already dealing with the loss. I've worked with too many clients who come to me after losing a spouse. They're overwhelmed by the financial complexity of their new reality. Retirement isn't just making ends meet to quit a job while ignoring difficult or more complex aspects of managing the wealth. It's about providing clarity and confidence so your spouse isn't left guessing or scrambling when they're already navigating a difficult emotional transition. This is also where an estate plan comes into play. So are you Are your legal and financial documents up to date when it comes to planning your future? Having your legal and financial documents in order to is one of the most important things you can do not just for yourself, but for your entire family. Yet, too often I see people approach this part of their plan as either a set it or forget it task or just feeling like they don't need it altogether, they create a will, maybe a trust, and assume they're covered for life. But life doesn't stand still, and neither should your legal documents. Your will or trust may have been thought through thoroughly years ago, but the question is, has your life stayed the same since then? Have there been any changes in your family, like a marriage, a divorce, maybe new children, grandchildren, or maybe a loss of a family member? What about your financial situation? Maybe you purchased new assets, sold properties, Maybe you built a business or sold the business. These are the kind of things and changes that can render an old plan ineffective or even counterproductive. Without regular updates, the documents meant to protect your wishes and your loved ones can unintentionally cause more stress, confusion, or worse, legal disputes. It's not uncommon for people to think, I have a will, I'm set. But a will alone doesn't necessarily address the complexities of your life or your finances. It doesn't account for medical emergencies, long term care decisions, or the financial responsibilities your loved ones might face if you become unable to sign for yourself or make decisions for yourself. This is why having a broader legal framework, one that includes medical directives, powers of attorney and trust, is so critical. The truth is, life changes, right? Family grows, priorities shift. Legislative changes need to be considered. Regularly reviewing your documents within a state attorney might seem like a hassle, but it's a small step that can save your family from significant challenges down the road. Because it's not always about fixing problems, it's about preventing them from happening in the first place. At the heart of this process is something bigger than documents and signatures. It's about protecting the people you care about and preserving the life you've worked so hard to build. Your legal framework isn't just a set of instructions. It's really a reflection of your values, your priorities, and your love for the people who matter most to you. When your documents are up to date, you're not just ensuring that your wishes are respected. You're giving your family the gift of clarity and peace of mind. You're sparing them from unnecessary stress and allowing them to focus on what really matters during challenging times. So we've covered a lot today, and if you're unsure where to begin, don't worry. You're not alone. This can be overwhelming when you attempt to go at it alone. That's why I did create a retirement checklist designed to help you think through all the key elements of your plan. You can download this checklist from my Brian Scribonia.com website. You just fill out the form there on the front page and you can download your checklist. Also, of course, if you want help reviewing your plan, or if you don't have one and want to get started, you can reach out to my team through any of my websites. You can go to Brian scribonia.com scriboniofinancial.com scriboniawealth.com buildbanking.com that concludes today's show. I am Brian Scribonia and thank you for listening to the Common Sense Financial Podcast. Thanks for listening to today's show. If you liked what you heard, be sure to subscribe on YouTube and Spotify so that you can receive notifications when we release new episodes. I'm Brian Scribonia and this is the Common Sense Financial Podcast.

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