Should Your Retirement Crash?
A financial and retirement crash? What! Are we talking crazy?
We don’t mean a stock market crash, nor are we suggesting you should wind up broke. And, although we did say “crash,” it’s not what you think.
2005 saw the release of the controversial, Academy Award-winning movie “CRASH.” While the movie’s premise has nothing to do with our reference to it, there is one important component that makes it relevant for you and your financial future.
The movie opens with a crash (obviously, a brilliant title!), where one car rear-ends another driven by a police officer headed to the scene of a crime. Of course, the plot thickens, but for that version, it’s best you watch the movie. For us, “CRASH” has a much different twist.
The movie entwines multiple separate storylines all seemingly unrelated to one another. However, as the movie unfolds, we learn that they DO have something in common, something called “The End.” Each storyline is a chapter in “The Big Picture.”
Eventually, we learn if all storylines did not occur in the exact sequence they did, then the crime, the investigation, and the resulting crash never happened. “The End” never materializes. That means every story and each character would have experienced a completely different outcome. Now, you’re probably thinking, “What does this movie have to do with my retirement?”
The Underlying Message
Just as the movie’s storylines are separate events entwined, leading to the eventual conclusion, “the crash,” almost every aspect of your financial life should also be entwined, leading toward your desired outcome.
But unlike the movie, where the ending only happened circumstantially, your retirement crash will only happen intentionally. It can only be the result of a carefully planned, well-organized combination of financial products designed to work as one cohesive unit, each playing a specific role in your plan.
Your own “CRASH” can result in greater control, flexibility, and most importantly, the maximum financial benefits you’re entitled to — your very own “The End”!
Why Does That Retirement Crash Rarely Occur?
When a consumer purchases a financial product, they generally make the decision based solely on the product itself, what it is and what it has been designed for — life insurance for death protection, annuities for income, mutual funds for growth, etc.
However, many people make purchases unwittingly and without consideration of their overall value to each portion of their plan, unaware of how some products can also work as a cog in their financial engines — a value beyond its original purpose.
Many products serve a purpose other than their original intents. For example, products like soda water can be used to remove a coffee stain. Baking soda meant for cooking can be used to remove corrosion from a car battery. How about a bed of rice to dry out a waterlogged cell phone?
Financial products are no exception. They too can often serve purposes beyond their original intents to enhance the storyline of your retirement movie.
The Missing Ingredient … Coordination!
The missing ingredient in most financial plans is what we call coordination. It’s an intentional grouping of specific financial products correlated to work together.
The objective: to have all your products, savings, insurances, investments, Social Security, etc., each with its own unique benefits, playing a role in your “Big Picture.”
Coordinating Your Retirement
When planning for retirement, there are two halves to consider: the accumulation half, when you save and grow your money, and the distribution half, when you’re receiving your funds back as an income. It’s important to have both halves coordinated from the start, because they are not mutually exclusive.
Unfortunately, many people (even some advisors) typically focus only on the first half without any consideration to the impact each product may have on the second half. This is one reason why many plans go awry.
For example, the majority of retirement savings are locked into government-sponsored programs such as 401(k)s, IRAs, and pensions (if you’re lucky enough to have one). That’s because they are the most common and the most commonly promoted options. Add in the ability to save on your taxes immediately and there is an incentive to use them.
But how will those plans affect your Social Security benefits? And, how will Uncle Sam determine how much of your money he wants from your savings during your retirement? And that’s just for starters. Here are some additional questions you need to consider when planning your retirement.
1. Can you avoid losing money to a stock market crash before or during retirement?
2. Exactly where will all your investing and planning lead you?
3. What income can you expect to attain during retirement?
4. Will your income be fixed, or can it be increasing, helping to offset inflation?
5. Will your assets and your income last throughout your lifetime?
6. Will you have to forfeit potential growth to get the highest monthly income from your savings?
7. What will happen to your estate if you or your spouse develop a critical or chronic illness?
8. Can you afford the premiums to pay for an illness that may never occur?
9. Is life insurance necessary if you have accumulated substantial assets?
Allow me to answer that last one now. If you’re married or wish to leave a legacy to your heirs in the most financially efficient manner for you and them, life insurance is not just an option – it may be required!
“Are We Communicating Yet?”
So, is your retirement plan discussing your future with Uncle Sam? Do you know if you will be in a higher or lower tax bracket in retirement than you’re in today? Will your estate be subject to erosion due to fees, expenses, and the IRS when you pass on? Will you be able to receive the maximum income distribution when you retire or will you settle for less – unintentionally?
These questions are why we’ve always believed that one of the most important principles to retirement planning is coordination — every facet “talking” to the other. Yes, your 401(k) needs to talk to your tax planner, who talks to your health care, which is communicating with your insurance plans, and so on.
The Final Sequence
Just as there were sequences to the storylines in the movie leading up to the crash, there are also sequences in the distribution phase that affect your retirement. Here’s one… “the sequence of withdrawals.” And here’s why: All financial plans are not created equal, especially with how they are treated by the IRS. Has anyone ever explained to you how withdrawals from one account over another might increase or decrease your tax liability? The fact is, there can be advantages to the specific sequence of how you take your withdrawals.
Many people take sporadic withdrawals from whichever account they choose without regard for the overall tax implications. For that reason, it’s easy to mess things up. If this sounds complicated, that’s because it is! You can’t just wing retirement planning on your own or with an unqualified advisor and expect good results. That’s why you need a knowledgeable, trusted professional in your corner.
Together, we have spent over 50 years in the financial and retirement planning arena, working directly and indirectly with thousands of clients while mentoring hundreds of advisors nationwide. Along the way, we’ve learned just how little is really understood about the process of plan design, coordination, and communication.
In the end, it’s those separate storylines, applied in the right sequence and used properly, that can help you control the lifestyle you’re entitled to — your very own “crash!”
The good news: Done right — you don’t have to be a millionaire to retire like one!
Robert and Deanna Goldsmith have been business and life partners for more than 25 years. Robert’s financial experience goes back to 1978, while Deanna began her career in 1992 administratively before venturing into the income planning arena. Their zest for business and life has been their recipe for success while building their practice and an advisor development program, having coached hundreds of advisors nationwide. They credit their success to their commitment to integrity and hold a simple business philosophy: If you have integrity, nothing else matters. If you don’t have integrity, nothing else matters!
This content was brought to you by Impact PartnersVoice. © Copyright 2019 by Robert & Deanna Goldsmith and Financial Fitness and Insurance Services, LLC (on the web at www.Financial411.Net.) The preceding is a copyrighted excerpt from the upcoming book “From Diapers to It Depends”, by Robert & Deanna Goldsmith. Robert Goldsmith has been a licensed professional since 1982, CA License #0814471, TX Insurance License #1262271. Deanna Goldsmith has been a licensed life agent since 2003, CA License #0D99734, TX Insurance License #1603918 and is a National Social Security Advisor. Both are Members of National Ethics Association. This article is an opinion editorial, for entertainment purposes only and is not intended to provide any insurance, tax, legal or investment advice. For legal or tax advice you should always seek out the assistance of a licensed legal or tax professional. For investment advice, seek out the assistance of a knowledgeable licensed securities professional or investment advisor. DT903011-0720