What Does it Take to be Happy in Retirement?

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Here at Gainer Financial and Insurance Services, Inc. we are dedicated to helping our clients create and enjoy a happy, fulfilling, and successful retirement for themselves. We help you eliminate the question marks in your life that could destroy that security and enjoyment. From wealth building to legacy planning there are a laundry list of issues that must be considered and planned for in order to enjoy that kind of worry free retirement.

How Do You Define a Successful Retirement?

There are so many different considerations that make up a successful retirement; taxes, markets, health issues, legacy, work, volunteering, travel, family, risk management, and the list goes on. Not only is this list long and diverse, it changes all the time. Consider just in the area of taxes, Congress makes changes every year to the income tax code, add that to state and local taxes and fees being passed all the time and you can be overwhelmed. As a result, many folks follow tax strategies that might have worked at one time, but due to a change in tax law, could now create a tax problem that results in huge losses.

How Taxes Play A Role in Your Retirement Happiness

When tax deferred accounts like IRA’s, Keough plans, etc. were first created in the early 1970’s, our top marginal tax rate was 90%! This means that if you were making a decent income, your marginal rate was often 50% or more. You were also able to deduct a lot of things from your taxes back then to offset your tax burden. In that environment, it made a lot of sense to contribute pre-tax money and defer paying taxes until you’re retired. After all, you were most likely to be in a lower tax bracket. Today, with the top federal bracket at 39.6% for incomes over $466,951 for a married couple and $415,051 for a single person, there is a good chance you will be in the same or higher tax bracket when you retire, which can negate any advantage or tax “deduction” you might enjoy today. This is particularly true for people who are in the 25% tax bracket or lower.

Stop Using Your Tax Deferred Retirement Account for Savings

Even worse, most people are mainly using their tax deferred retirement accounts as their only retirement savings vehicle, leaving them extremely vulnerable to future tax increases, should congress decide that we need more revenue. I would also like to point out that for most, they will pay more tax, even if rates don’t rise! This is because we lose most of our ability to offset taxes in retirement, since we won’t have as many things to write off once we retire. During our working years, we can use business expenses, our kids, and mortgage interest as deductions to help reduce our tax burden. When we retire, business deductions are gone (after all, you would be retired!), the kids are too old to deduct (even if they are still living at home), and most clients tell me they are working hard to pay off their mortgage prior to retirement.

The 5 Things You Need to Plan For in Order to Retire Happy

1. Never run out of money. This one is the most important. All other risks come from this one. If you die shortly after retiring, you don’t need to worry about markets, rates, taxes, health issues, etc. It’s only if you live a long, full life will those risks to retirement happiness be a concern. Having a strategy to provide guaranteed lifetime income that will cover your basic lifestyle is the first key to retirement happiness.

1. Keep it simple. I haven’t met anyone who told me they are looking forward to retiring and spending all their time evaluating stocks, or dealing with tenants and contracts. Most of my clients want to travel, spend time with family, do volunteer work, etc. They want to know their money will be there for them, regardless of what the markets do.

Also, there have been a number of studies in the last few years that show one’s ability to evaluate financial alternatives declines with age. This has no relationship to whether someone has dementia or other cognitive disorder like Alzheimer’s. According to one study from 2013, this can lead to decisions that can lead to significant increases in risk of losing one’s money.

Simplicity is also important in legacy planning. Making a lot of small bequests, having too many executors, or getting too “creative” can create huge headaches for your kids and relatives.

1. Have a plan for tax diversification. You must have a plan for taxes. We try to diversify your situation within the tax code. After all, congress is virtually guaranteed to change taxes in the future, it’s what they do. We just don’t know what those changes will be. Being diversified in relation to the tax code can offer a lot of peace of mind when those changes come. Having some money that will be taxed as capital gains and some that will be tax free, in addition to ordinary income can provide that flexibility. Note: your pretax retirement plan money (IRA’s,401k’s, SEP’s and TSA’s, etc.) is taxed as ordinary income.

1. Risk management is a key consideration. Whether it is car and homeowner’s insurance, or your estate plan, identifying the risks that can make your life miserable, and then having plans in place to mitigate those risks will keep disruptions to a minimum. Health care, long term care, interest rates, market crashes, lawsuits, greedy relatives, etc. are all risks that can ruin an otherwise happy successful retirement. We don’t want to overpay for insurance, so having these risks in focus will help you in planning for and avoiding the disaster that can result from these issues.

1. Don’t be bored! For many folks, retirement was just when you stopped working for a living. They didn’t think about how much time they will have. Without a reason to get up, boredom will set in and you just won’t’ be having much fun. If you aren’t having some fun, you won’t be happy. Remember in our Declaration of Independence, it’s “life, liberty and the pursuit of happiness”! My clients who came to retirement with a vision for this phase of their life, are far happier than those who chose to just stop working. I have happy clients that sing in the chorus, teach computers to disadvantaged people, work at the Marine Mammal Center, become artists in other countries, or are sailing around the southern hemisphere. They have taught me well that having a plan makes everything else more satisfying and fun.

If you keep these things in mind when making decisions about your retirement, I suggest you will be happier and more fulfilled. You can download a copy of our free Gainer Financial Thought Organizer to help you get started on your path to a happy, fulfilling retirement. If you would like additional input in expanding your plan to include happiness, contact us for a free one hour consultation. Then you can decide if we are the right partners to help you create your best retirement.
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