Retirement Planning | Live a Life By Design

Relocation Considerations for Retirement

Posted on January 10, 2020January 8, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

One of the most difficult decisions in retirement planning is to relocate. If you reside in a state that has a high income tax rate, sales tax rate and/or ad valorem tax, it may be something to consider. During the retirement phase of life, your savings must last beyond your lifetime. To ignore the cost of living could be the difference between truly enjoying a lifetime of income and experiencing worry at a time in life that you shouldn’t.

A recent study of individual taxation by state yielded some not-so-surprising news. California, Hawaii, New York, Connecticut and Illinois are the highest taxing authorities on individuals. These states are currently seeing an exodus of its citizens to lower cost of living states. To eliminate 15% of your tax liability by simply relocating to Texas or Florida, states without individual income tax assessments, may provide the additional savings needed for your savings to last to lifetime.

Another area of consideration is property tax. If a state does not assess an income tax on individuals, it will, in most cases, utilize an ad valorem, or property tax, to generate revenue needed to fund the state’s functions. For example, some people consider moving to Texas due to its absence of individual income tax assessments. However, in most of the counties contiguous to the Dallas metroplex, the rate of assessment for property taxes creates more of a tax burden than one would pay by remaining in Oklahoma.

Personal property tax is another consideration when relocating in your retirement years. States have begun to assess sales tax on automobile purchases versus the excise tax previously charged for such transactions. It may take some of the joy out of your new purchase when you realize the bill from the state could be as much as $5,000!

Lastly, two of the necessities of life are utilities and food. When considering relocating, the cost of meals and household utilities should be considered. In extreme temperature climates such as experienced in Alaska, the cost of food and utilities, compared to Oklahoma, are very expensive. Due to the lack of fruit, vegetable and dairy production facilities and farms, these important staples of life must be flown into the location. The costs of delivery cause extremely high retail costs for consumers.

Although Hawaii may be the land of paradise many of us enjoy on vacation, the cost of living on the islands is very high compared to other states. Recently, we enjoyed a stay on Oahu and the cost of a gallon of milk was $7.99! If you are raising kids in your family, it may be cheaper to buy a cow.

It is important to consider many aspects when thinking of relocating during retirement. Cash flow is the ultimate factor coupled with your ecological requirements. One of the lowest costs of living states is Tennessee but you may wish to see the beautiful ocean shore each day. Trade-offs are a part of our lives. Rate the most important factors for you before undertaking a move to another state.

If you have questions as to how you can create a lifetime income plan, contact a Certified Financial Planner^TMpractitioner to assist in the analysis so that you can make the best decision for your family’s needs.

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3 Mistakes Most People Make With Their Retirement

Posted on November 15, 2019November 15, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

During my thirty year career of guiding individuals to realizing their retirement goals, I have reduced the most critical of mistakes people commit when accumulating retirement assets in their employer’s plan. These mistakes can be overcome and people have a higher probability of reaching their intended goals.

Mistake #1: Making Decisions through Fear

Investing should be performed with a clear mind and thoughtful research being the driver for change. Too often people accumulating for retirement commit the mistake of making changes to their retirement plan account after the negative impact has occurred. This is the equivalent of turning on the hydrant and spraying water on your house after the structure has completely burned to the ground.

We believe everyone should self-assess their goals for retirement. These goals should be attainable. For example, everyone uses the same phrase when thinking about investments: “High return on my investments with no risk.” This, of course, is a fantasy. Risk is present in every facet of life including your employer-provided retirement plan.

To correct for this mistake, learn to keep calm during temporary market disruptions. With the volatility of our current markets, you would be buying and selling all the time and miss the opportunities to meet your goals for long-term growth.

Mistake #2 – Timing the Market

One of our clients informed us that a former colleague of his was constantly buying and selling in his Thrift Savings Plan. His friend thought this approach would prevail for better growth in his account. However, just the opposite has been proven true by economists and researchers of behavioral finance. To believe a long-term perspective can be maintained with such a short-term approach to finances is not a valid one.

To overcome this mistake, each investor should realize he doesn’t possess all of the knowledge of the market and may turn his retirement plan assets into a speculative investment. This does not have to be the case. We firmly believe proper allocation and diversification of your portfolio will keep risk at acceptable levels while obtaining long-term potential for your assets.

Mistake #3 – Borrowing from Your Retirement Savings

As individuals it becomes difficult for us to look at this bucket of money and experience struggle in our lives. Instead of adjusting our lifestyle and budgeting within our means, we use loans from our retirement plans with the understanding that we are “borrowing from ourselves so it isn’t hurting my account”. The fallacy of this statement is that you’re, in fact, providing for a shortfall in your retirement account during possible peak earnings or growth seasons.

Your plan will require interest to be paid on your “loan”. The rate of interest is usually lower than your market returns and the smaller payments returned to your account may grow but your overall compounding effect will be diminished.

The overall solution to these critical mistakes is to ask for advice from someone that can hold you accountable to a plan that you design for your future. We serve as an advisor as well as life coach for our clients. To be that calming voice of assurance when you are making progress or the soft correction needed when you attempt to deviate from your plan allows us to help you achieve success on your terms.

If you are concerned about your current ability to reach your retirement goals in your TSP, IRA, 401(k) or other employer plan, contact a CPA/PFS or Certified Financial Planner™ practitioner for a complimentary consultation. You may find the answers you need.

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How to Retire Worry-Free

Posted on August 19, 2019August 16, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

If you are like many of our clients, prior to retiring, you are concerned about the process and ability to continue your current lifestyle after discontinuing your career. This is a valid concern and one that we address with every client considering retirement. To provide confidence and courage to initiate this important step, and truly enjoy retirement, we developed a unique process that alleviates these concerns and empowers our clients with predictability in their lives. Do you have a process to create the retirement lifestyle you desire?

First, you must develop a mental approach to retirement that is healthy. Worry will do nothing to resolve a challenge but make it feel more overwhelming that it truly is. To create confidence in your life, we assist our clients with the identification and implementation of activities that generate positive thoughts and enhance self-esteem. You are probably wondering what this step has to do with a successful retirement plan? It is the key ingredient! Thinking about others, showing gratitude and fulfilling the needs of others are the truly valuable “assets” in a person’s life. Qualitative characteristics of retirement are as critical to the process material resources. This stage of the process has nothing to do with money, budgets or investments. However, if we can help you become more confident by helping others, the process of retiring is simply a transition from focusing on your career to focusing on others in your community.

Helping others is one method of creating a worry-free retirement. Seek out those in need and create a legacy for yourself through service.

Next, we assist our clients in creating expectations for the next phase of life. To expect more income from your resources, than you properly prepared for during your accumulation years, is to set a tone of frustration for yourself. By prudently projecting reasonable returns and estimating living expenses that are realistic, you will reap the predictable, recurring and adequate lifestyle that you need to live worry-free. Many people believe it is too late to correct course on their retirement plan after the initial decisions have been made. This is not true. You can always create a better tomorrow through proper planning and executing on adjustments to create the life you desire. Your goal in retirement should be to maximize your quality of life. Life is too short to live in worry. A wise, old football coach, Leo Thurman, often offered advice to those around him. One such profound statement is:

“Son it don’t take long to live a lifetime.”
—Leo Thurman

Lastly, to mitigate worry, you must utilize a continuous monitoring system to help you manage your lifestyle and “stay on track”. Unlike the infomercial that promises you can “set it and forget it”, life is somewhat more challenging. You must adopt a mindset that anything worthwhile is going to require some input of your time, talents and resources. Don’t tackle a job without the proper tools and experience. You only get one chance to retire the first time. Seek out a Certified Financial Planner^TM practitioner that specializes in the needs and desires of retirees to help you build a plan that is sound and creates a worry-free retirement for you.

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How to Increase Your Retirement Assets in Three Steps

Posted on July 22, 2019July 17, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

As we presented in the last article, we will focus, in this article, on the simple steps anyone can take to improve their retirement planning strategy. Time is of the essence. If you feel you have not saved well for retirement, by making these three simple steps a habit now, you will reap exponential benefits later.

Step One: Budget

First, review your family budget and immediately reduce the unnecessary cash outflows. These may be subscriptions to magazines never read, automatic renewals for insurance on your vehicles that are costing more than your 10-year old car is worth and those movie channels that are never watched since the kids moved out. Now, I know what you are thinking. “This isn’t that much money each month.” You are correct in the short-term sense; however, if you have more than 5 years until your desired retirement date the sum of funds can amount to a significant support for your future.

Step Two: Maximization

Second, immediately maximize your employer-provided return plan contributions. Remember, if you are age 50 or older, you may contribute an additional $6,000 per year as a “catch-up” for failing to fully fund a 401(k) plan in your younger years. The total for 2019 that you may defer from your salary is $25,000 if you at least age 50. This amount of funding for the next 5 years will add at least $125,000 (not including growth or employer matching) to your retirement funds.

If you are self-employed, review your company’s cash flow and find ways to fully fund a Simplified Employee Pension Plan (SEP). You may contribute up to 25% of your salary or $56,000 whichever is lower for 2019. If you were to establish your budget for accumulating the maximum amount for the next five years, you would contribute an additional $280,000 (not including market returns) for your retirement support.

Step Three: Asset Allocation

Third, review your investment asset allocation. Recent economic data reports the Dow Jones Industrial Average and Standard & Poors 500 Indices are at record highs. Do not anticipate these returns for your retirement planning. We use a phrase in planning, “Plan for the worst and hope for the best.” Your investment allocation during retirement will most likely be different than your investment strategy for the accumulation phase of your life.

Forget about the past and your lost opportunities. You can only control the present. Start today in making positive decisions and change your future. I purposely used the word “immediately” several times in this column to impart to you the importance of taking action now. By preparing a plan and following the strategy, no matter what anyone else does, you may improve your chances for a happier and better retirement.

Concerned about the adequacy of your assets for retirement? It is time to take action. Seek out the guidance of a Certified Financial Planner^TM practitioner to gain the strategies needed to live life on your own terms. You will be glad you did.