Root Financial Archives - ROI TV

Why You Shouldn’t Rely Solely on Social Security for Retirement

James Conole — Sat, 21 Jun 2025 13:06:27 +0000

Social Security is one of the most important income sources for retirees, but if you’re depending on it as your primary retirement paycheck, you could be setting yourself up for unnecessary stress. I’ve worked with countless retirees who were shocked by unexpected costs, taxes, and how quickly fixed income gets squeezed by inflation. Let’s talk about why it’s risky to rely too much on Social Security—and what you can do instead.

Social Security Wasn’t Meant to Be Your Whole Retirement Plan

Over 40% of retirees count on Social Security for at least half their income. That’s a problem. The program was never designed to fully fund your retirement—it was created to provide a foundation. That consistent monthly deposit can help with everyday expenses, but it doesn’t stretch well when surprises hit—like home repairs, medical bills, property taxes, or that bucket-list trip.

If you don’t have additional savings, these one-time expenses often go straight onto a credit card, adding unnecessary financial pressure.

Cost-of-Living Adjustments Don’t Always Keep Up

Social Security includes annual cost-of-living adjustments (COLAs), but they’re based on the Consumer Price Index (CPI), which reflects the spending habits of working adults—not retirees. That’s a major issue. Retirees spend more on housing, healthcare, and services—not on gas and electronics.

Worse, COLAs are delayed by a full year. So when inflation spikes (like it did in 2022), your benefits don’t increase until the following year. That lag time hurts, and over time, the gap between your actual expenses and your adjusted income widens.

Yes, Your Benefits Can Be Taxed

A lot of people don’t realize that Social Security benefits are taxable. It depends on your “provisional income,” which includes half of your Social Security benefits plus other income, like IRA withdrawals or pensions.

Here’s an example: A single retiree with $2,500/month in Social Security and $10,000/year in IRA withdrawals may not owe taxes at first. But over time, COLAs and rising withdrawals can push their income over the $25,000 threshold, triggering taxes on up to 85% of their benefits.

So even if your gross income rises with inflation, your net income can actually fall. That’s the kind of surprise no one wants in retirement.

Anxiety Over Social Security’s Future Is Real

Let’s be honest—many people are worried about whether Social Security will still be around in 10 or 20 years. The projections aren’t comforting: some forecasts suggest a 20% cut in benefits if no legislative action is taken.

That’s why I encourage clients to aim for peace of mind—not just survival. Relying too heavily on a system that’s under political and financial strain can cause real anxiety. Diversifying your income sources creates freedom and flexibility—two things we all want in retirement.

How to Supplement Your Social Security

So, what’s the plan? First, make the most of what Social Security offers. If you can delay claiming until age 70, you’ll maximize your monthly benefit. That extra income can give you a little breathing room for things like travel or unexpected bills.

Second, build up your savings and investment portfolio. Having supplemental income gives you options—you can dial up spending in good years and pull back during market dips. Flexibility is your financial superpower.

Third, think creatively about your biggest asset: your home. Downsizing, relocating to a lower-cost area, or even exploring a reverse mortgage (as a last resort) can free up cash. But remember, reverse mortgages should be considered cautiously—they’re a tool, not a first move.

The Bottom Line

Social Security is just one piece of your retirement puzzle. Don’t put all your eggs in that one basket. With a little planning and some smart moves, you can create a retirement that’s flexible, resilient, and—most importantly—stress-free.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

The post Why You Shouldn’t Rely Solely on Social Security for Retirement appeared first on ROI TV.

The Hidden Traps of Roth Conversions: How to Maximize Tax-Free Retirement Without Triggering Costly Surprises

James Conole — Wed, 18 Jun 2025 11:36:36 +0000

Roth conversions are one of the most powerful retirement planning tools available—but they can also be one of the most misunderstood. If done strategically, converting traditional IRA dollars to Roth can reduce your lifetime tax burden and leave more for your heirs. But if done carelessly, it can trigger hidden traps that cost you thousands in unnecessary taxes and surcharges.

Let’s break down how to avoid the pitfalls—and how one couple, Bob and Sally, turned a good Roth conversion strategy into a great one.

1. Roth Conversions and Tax Bracket Management

Many advisors recommend doing Roth conversions up to a certain tax bracket—like 10%, 12%, or 22%—to “fill the bucket” without spilling over into higher brackets like 24% or 32%.

Why? Because later in retirement, Required Minimum Distributions (RMDs) can push you into a higher tax bracket. That’s exactly what was projected to happen for Bob and Sally. Converting early at a lower rate would reduce their taxable IRA balances and lower future RMDs.

Initially, they planned to convert up to the 22% bracket. This approach saved them an estimated $485,000 in tax-adjusted portfolio value by age 90—already a win. But it could’ve been better.

2. Beware of the IRMA Surcharge Trap

What Bob and Sally didn’t expect? Their Roth conversions bumped their Modified Adjusted Gross Income (MAGI) just $1 over the IRMA threshold—triggering higher Medicare premiums.

The Income-Related Monthly Adjustment Amount (IRMAA) increased their Medicare Part B and D costs by $5,828 annually.

But that’s not all. Because they had to withdraw extra funds from their IRA to cover those healthcare surcharges, the opportunity cost over 25 years was an estimated $47,000 in lost investment growth.

Just one dollar over the limit created a compounding penalty that turned a good tax strategy into an expensive oversight.

3. A Better Strategy: Stay Below IRMA

Once they revised their approach and aimed just under the IRMA threshold, Bob and Sally saw huge gains.

Instead of converting all the way to the 22% tax bracket, they converted slightly less—but avoided IRMA surcharges. That small adjustment increased their projected portfolio value from $485,000 to $760,000.

Why the jump?

Lower healthcare costs
More assets left in their accounts to compound
Better overall tax efficiency

Sometimes converting less can mean keeping more.

4. The Other Hidden Taxes of Roth Conversions

IRMA surcharges aren’t the only danger. A Roth conversion also affects:

Social Security “tax torpedo”: Increases in provisional income can make up to 85% of your Social Security benefits taxable.
Capital gains taxes: Higher MAGI can push long-term capital gains and dividends from 0% to 15% or even 20%.
Your heirs’ tax brackets: If your beneficiaries are in lower tax brackets, they might have paid less tax on inherited traditional IRA dollars than you will converting them now.

Every tax lever affects another—and ignoring that can lead to thousands lost.

5. The Case for Comprehensive Roth Planning

Smart Roth conversion planning involves more than just your current tax bracket. It means understanding:

IRMA thresholds
Social Security taxation
Capital gains interaction
Future tax rates for your heirs
Portfolio growth expectations
Medicare costs

Many retirees benefit from using retirement planning software or working with a financial planner who models these interactions. At the very least, understanding where each tax trap lives on the map gives you a fighting chance.

6. Final Takeaways

If you’re doing Roth conversions—or thinking about them—keep these takeaways in mind:

Roth conversions are powerful, but precision matters.
IRMA surcharges can turn small missteps into expensive, recurring costs.
Consider all the tax interactions, not just income taxes.
Legacy planning and Medicare costs should factor into your strategy.
A little foresight could mean hundreds of thousands in extra retirement dollars.

The right Roth strategy is less about brute force and more about finesse. Get it right, and your future self—and your heirs—will thank you.

The post The Hidden Traps of Roth Conversions: How to Maximize Tax-Free Retirement Without Triggering Costly Surprises appeared first on ROI TV.

The Retirement Tax Moves That Could Save You Thousands

James Conole — Sat, 14 Jun 2025 12:52:01 +0000

Taxes don’t stop when you retire but with the right strategies, you can drastically reduce what you owe. I want to walk you through three key tools that smart retirees use to stay ahead of the IRS: tax gain harvesting, avoiding the Social Security tax torpedo, and planning Roth conversions wisely. These moves aren’t complicated, but they require knowing how the system works and taking action at the right time.

Using Tax Gain Harvesting to Pay $0 in Taxes
One of the most overlooked strategies in retirement is tax gain harvesting. If you’re in the 0% long-term capital gains bracket $48,350 for singles and $96,700 for married couples in 2025 you can sell appreciated investments and pay zero federal tax. Take Joe Sample, a single retiree. He pulled $15,000 from his IRA, which was offset entirely by the standard deduction. Then he sold $60,000 in stocks from his brokerage account. Because his cost basis was $250,000 and his account was worth $1 million, $15,000 was a return of capital and $45,000 was a taxable gain still under the 0% capital gains threshold. Total tax owed? $0. That’s what smart timing and a little math can do.

Avoiding the Social Security Tax Torpedo
This one sneaks up on retirees. It’s called the Social Security tax torpedo, and it happens when other income like IRA withdrawals increases your provisional income and triggers taxes on your benefits. For example, let’s say you and your spouse receive $50,000 from Social Security and take out $40,000 from your IRA. Your provisional income hits $65,000, and suddenly, $23,850 of your Social Security becomes taxable. That bumps your effective tax rate to over 22%, even though you thought you were in the 12% bracket. It’s not just about how much you withdraw it’s about how all your income sources interact.

Getting Roth Conversions Just Right
Roth conversions are one of the most powerful tools for reducing future tax burdens—but only when done correctly. Consider John and Sally. They have $2.5 million in an IRA, and if they don’t act, their required minimum distributions (RMDs) will push them into higher brackets later. By converting a portion of their IRA now, while staying within the 12% tax bracket, they avoid a larger tax hit in the future. But there’s a catch. If you over-convert like in another scenario where a couple converted too much of a $250,000 IRA at once they faced a six-figure loss in after-tax wealth. The trick is to convert enough to reduce future RMDs, but not so much that you spike your current tax bill.

Why These Strategies Matter
In retirement, tax planning becomes more important not less. It’s not just about how much you’ve saved, but how much you get to keep. Understanding how capital gains, Social Security benefits, and IRA distributions all play together can mean the difference between a comfortable retirement and one filled with surprises. A personalized tax map based on your income, assets, and goals can help you take advantage of the 0% capital gains bracket, minimize the impact of the tax torpedo, and convert your Roth IRA with confidence.

The post The Retirement Tax Moves That Could Save You Thousands appeared first on ROI TV.

Unlock the Full Power of Your Roth IRA

James Conole — Wed, 11 Jun 2025 11:59:41 +0000

When it comes to tax-free income in retirement, the Roth IRA is hard to beat but only if you know how to use it right.

I’ve seen too many people miss out on key benefits, or worse, get hit with penalties simply because they didn’t fully understand the rules. So let’s break it down: how Roth IRAs work, the rules you need to follow, and how to use them to create a powerful, tax-free retirement strategy.

First, why Roth IRAs are such a big deal.
Unlike traditional retirement accounts, Roth IRAs offer tax-free growth and withdrawals in retirement. That means you don’t pay taxes on the money you pull out later huge for planning your income in retirement. And they’re also great legacy tools, as beneficiaries can inherit Roth assets tax-free.

Now let’s talk about the three sources of money inside a Roth IRA: contributions, conversions, and growth.

Contributions are the easiest to manage. You can withdraw them at any time, for any reason, tax- and penalty-free—regardless of your age.
Conversions are a little trickier. Each conversion has its own five-year rule, especially if you’re under age 59.5. More on that in a minute.
Growth is where the biggest benefits are, but also where the rules get tighter. You can’t access growth tax-free unless you’re over 59.5 and have satisfied the five-year rule.

The five-year rule trips up a lot of people.
Here’s how it works: Your Roth IRA must be open for at least five years before you can take tax-free withdrawals of growth. That five-year clock starts with your first contribution—not each new deposit or account.

So if you opened your first Roth at age 40 and you’re now 60, you’re good to go—even if you’ve opened new Roth accounts since then. But if you opened your first Roth at 58 and want to access growth at 60, you’ll need to wait until 63 to get full tax-free treatment.

Conversions have their own five-year rule—and it resets with each one. Let’s say you make conversions at ages 50, 51, and 52. You can’t touch the money from each conversion until five years after each respective date unless you’re over 59.5 and you’ve met the general five-year rule.

That’s why Roth conversions are better suited for long-term planning. If you’ll need the money in the next few years, it might not make sense to convert.

Contribution limits for 2025 are pretty straightforward:

$7,000 if you’re under 50
$8,000 if you’re 50 or older

There’s no limit on conversions, but remember—every dollar you convert is taxed as ordinary income in the year you convert it. If you convert $1 million in a single year, it’s like adding $1 million to your W-2. Be strategic.

How does the IRS track your withdrawals?
They assume you withdraw money in this order:

Contributions
Conversions
Growth

This simplifies things for you. If you’ve got $25,000 in each bucket, the first $25K you pull is always a contribution—tax-free, no matter what.

So what’s the big takeaway?
The Roth IRA is a powerful tool, but only if you understand how to use it. Make sure you know when the five-year rules apply, when conversions make sense, and how to use Roth money for long-term tax-free growth. The longer you let your Roth grow, the more powerful it becomes.

If you play by the rules and plan smartly, a Roth IRA can become one of the most valuable tools in your retirement plan.

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Are Roth Conversions Worth It? How to Save Millions in Retirement Taxes by Planning Smart

James Conole — Sat, 07 Jun 2025 12:02:34 +0000

Many retirees wonder if converting their traditional IRA to a Roth IRA is worth the upfront tax cost. As it turns out, the answer could be a resounding yes if you evaluate it correctly. Roth conversions aren’t just about reducing taxes in a single year they’re about optimizing your entire retirement.

Let’s take a closer look at how a strategic Roth conversion can save millions over a lifetime and why tax-adjusted value is the key metric that too many people overlook.

1. Why Roth Conversions Could Save You Millions

Take the example of Luke and Mary, two retirees considering converting portions of their traditional IRA into a Roth. By using a strategy of filling up the 22% federal tax bracket each year until age 72, they stand to gain an additional $3.3 million in tax-adjusted earning assets, while paying $3 million less in lifetime taxes and making $6 million fewer withdrawals from their traditional IRAs.

That’s not a typo this is the power of long-term tax planning.

By converting before Required Minimum Distributions (RMDs) kick in at age 73, retirees like Luke and Mary can lock in lower tax rates now and minimize higher tax hits later.

2. Understanding the Opportunity Cost of a Roth Conversion

Here’s the catch: converting $100,000 from a traditional IRA to a Roth IRA at a 22% tax rate triggers a $22,000 tax bill money that no longer grows inside your portfolio.

That $22,000 opportunity cost is real and measurable. But it also leads to a dangerous misconception: that Roth conversions don’t “pay off” for years or decades.

What matters more is not how many dollars you have today, but how much of that you actually get to keep. Which brings us to…

3. Tax-Adjusted Asset Value: The Right Way to Measure Wealth

Comparing Roth and traditional IRA balances at face value is like comparing apples to oranges.

For example:

$1 million in a traditional IRA may only be worth $750,000 after taxes, assuming a 25% effective tax rate.
Meanwhile, $800,000 in a Roth IRA is tax-free, making it more valuable than the higher balance traditional IRA.

This is called tax-adjusted asset value and it’s the most important way to evaluate Roth conversions.

4. Finding the Real Break-Even Point

Many people fear Roth conversions because they think it takes decades to break even. That’s only true if you’re comparing raw balances.

But when you look at tax-adjusted value, the break-even comes much sooner.

Let’s say you convert $10,000 at a 12% rate. You now have $8,800 in your Roth. Even if tax rates rise to 22% later, that Roth amount remains untouched by future taxes. In contrast, your traditional IRA would be taxed at the higher rate.

This makes Roth conversions a hedge against future tax hikes and that’s a critical part of planning for uncertainty.

5. Why Retirement Planning Is So Complex

Roth conversions aren’t the only factor in retirement planning. You’re juggling:

Traditional IRAs and 401(k)s (tax-deferred)
Roth IRAs (tax-free)
Brokerage accounts (capital gains)
Social Security (partially taxable)

Each asset type has a different tax treatment. That’s why professional retirement modeling tools and advisors can make a big difference in planning when and how much to convert.

6. The Big Picture: Roth Conversions as a Long-Term Play

At first glance, Roth conversions may seem like you’re taking a hit. You pay taxes now, which reduces your immediate portfolio size. But this isn’t about today it’s about your lifetime tax liability and the true, after-tax value of your assets.

In the case of Luke and Mary, it took financial modeling and a shift in perspective to realize they’d gain millions in value not by increasing risk or working longer, but simply by managing taxes more effectively.

Conclusion: Pay Taxes on Your Terms, Not Uncle Sam’s

Roth conversions aren’t for everyone. But for many retirees, they’re one of the most powerful strategies to lock in low tax rates, maximize portfolio value, and reduce the IRS’s cut of their life savings.

The key is understanding that the value of your retirement plan isn’t just what’s on paper it’s what you get to keep. And Roth IRAs let you keep more of it.

The post Are Roth Conversions Worth It? How to Save Millions in Retirement Taxes by Planning Smart appeared first on ROI TV.

How I’d Invest Before Taking Social Security: Portfolio Strategies for Early Retirees

James Conole — Wed, 04 Jun 2025 11:34:51 +0000

Retiring before you claim Social Security sounds great but there’s a hidden challenge many people overlook. If you retire at 62 but delay Social Security until 67, your investments need to carry the full weight of your expenses for those five years. And if the market stumbles during that time? Your entire retirement plan could unravel.

Let me walk you through what I’d do if I were in this situation specifically, what Becky (a hypothetical retiree) should consider when facing this exact scenario.

Becky’s Retirement Setup

Becky is 62, with a $1 million 401(k) portfolio and plans to spend $5,000 per month, or $60,000 annually, adjusted for 3% inflation. She doesn’t want to claim Social Security until age 67, so her investments need to fund her lifestyle entirely until then.

The problem? Becky’s entire portfolio is invested in U.S. large-cap growth stocks with an assumed return of 8.5%. That’s great in theory, but what happens if the market crashes during her first few retirement years?

The Withdrawal Crunch

During the five-year pre-Social Security gap, Becky’s portfolio will need to fund all her expenses potentially requiring 6.5% to 8% annual withdrawals. That’s well above the safe withdrawal range, especially in volatile markets.

Here’s the good news: once Becky turns 67 and starts Social Security, her need for portfolio withdrawals drops significantly from 8% to just 3.2% by age 68.

But surviving those first five years without sabotaging the entire retirement plan is the real test.

Why Early Market Losses Can Ruin Retirement

If Becky’s portfolio takes a major hit during those early years, her withdrawal percentage goes up. That’s the danger of sequence of returns risk the idea that losing money early in retirement is much worse than losing money later.

Bear markets typically last between 2.5 and 5 years. That means Becky could easily run into trouble if she doesn’t have a more stable, diversified portfolio to weather that period.

The Right Portfolio Shift: From Growth to Balance

To handle that five-year window, Becky needs around $380,000 to cover her expenses. Some of that say $80,000 might come from dividends (assuming a conservative 1.6% yield after a 20% dividend cut). But that still leaves $300,000 that needs to be safe from market swings.

That’s why I’d recommend shifting her portfolio to a 70/30 mix 70% in stocks, 30% in high-quality, short-term bonds. This gives her some growth, but also a layer of protection to draw from during market dips.

What Does This Do to Her Long-Term Plan?

Yes, moving from 100% stocks to 70/30 slightly lowers potential long-term growth. But here’s the trade-off: it increases her probability of retirement success. Her current all-stock plan has a 73% success rate. With the adjusted portfolio, that number climbs and her plan becomes much more resilient.

Once Becky hits 67 and her withdrawal rate drops, she can consider reallocating for more growth if her financial picture looks strong. But early on, stability matters more than potential.

Key Takeaways for Anyone Retiring Before Social Security

If you’re retiring before claiming Social Security, here’s what you need to know:

Calculate your pre-Social Security gap and make sure you have a stable source of funds to cover it.
Adjust your portfolio allocation to reduce risk during early retirement.
Use short-term bonds or cash reserves to avoid selling stocks in a down market.
Revisit your plan once Social Security kicks in and your withdrawal rate drops.

Retirement isn’t about hitting a perfect number it’s about creating a strategy that holds up when the market doesn’t. For Becky and for anyone else looking to retire before collecting benefits that means making smart portfolio moves now to protect your future freedom.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

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5 Questions to Know If You’re Really Ready to Retire

James Conole — Sat, 31 May 2025 17:25:43 +0000

When I sit down with people planning for retirement, the focus is almost always on the numbers. Have I saved enough? What’s my withdrawal rate? When should I claim Social Security?

Don’t get me wrong—those are critical questions. But retirement readiness goes beyond spreadsheets and simulations. It’s not just about whether you can retire it’s about why, when, and how you want to live the next phase of your life.

In this article, I want to shift the conversation and ask you five essential questions that go deeper than financial figures. These questions are designed to help you find the right balance between security and fulfillment.

1. Am I Trading Time for Money I May Never Use?

One of the most sobering moments in my career came from a client who worked tirelessly into his late 60s. He was driven by financial perfection he wanted to hit one more milestone, boost his portfolio just a little more. He finally retired… and passed away shortly afterward.

That experience shook me. It’s a reminder that time is a nonrenewable resource. Working longer can strengthen your retirement finances but at what cost? If you’re delaying retirement in pursuit of a few more percentage points, ask yourself: Am I sacrificing experiences I may never get back?

2. What Is the Cost of Working Longer on My Health?

By the time most people reach their early 60s, they’ve been through decades of stress, deadlines, raising kids, and juggling responsibilities. And it shows. Studies link prolonged work stress to higher risks of depression, heart disease, and stroke.

You can plan for a long retirement, but don’t forget to plan for a healthy one too. The longer you work, the more you may be chipping away at the healthiest years you’ve got left. I always ask clients: Are you extending your financial runway at the expense of your health span?

3. How Much Time Do I Really Have Left with the People I Care About?

Retirement isn’t just about not working it’s about living. And a big part of living is being with the people who matter most. Yet for many of us, work steals the bulk of our waking hours. Long commutes, late-night emails, weekend shifts—they all add up to lost moments.

Think about your aging parents, your grandkids, your friends who live across the country. How many more trips, birthdays, or holidays will you get with them? Retirement gives you back time but only if you take it.

4. Am I Planning for a Healthy Retirement Or Just a Long One?

There’s a big difference between life span and health span. Life span is how long you live. Health span is how long you stay energetic, active, and vibrant.

The first five years of retirement are often the best years to do the things you’ve always dreamed of: travel, take up new hobbies, spend quality time with grandkids. But if you wait too long, your body may not keep up with your bucket list. Don’t plan your retirement to begin after your best years plan it to include them.

5. Am I Letting Fear Delay a Financially Feasible Retirement?

I’ve seen it more times than I can count people who are financially ready to retire but just can’t bring themselves to do it. “Just one more year,” they say. But one becomes two, then five.

Yes, you need to be financially prepared. But sometimes we confuse preparation with perfection. If your plan is solid, your debts are low, and your income streams are in place, don’t let fear rob you of the time you’ve earned. The goal is not to die with the most money it’s to live with the most meaning.

Final Thoughts: Balance Is the Real Goal

If you’ve already asked yourself the classic financial questions what’s my savings target, what’s my withdrawal rate, when to take Social Security great. But now it’s time to ask yourself these five deeper questions.

Because the truth is, retirement readiness isn’t just about having enough money. It’s about having enough life left to enjoy it.

The post 5 Questions to Know If You’re Really Ready to Retire appeared first on ROI TV.

How to Overcome the Mental Block of Spending in Retirement

James Conole — Wed, 28 May 2025 11:32:57 +0000

For decades, the message has been clear: save, invest, and prepare for retirement. But what happens when you’ve done all that only to find you can’t bring yourself to spend the money you worked so hard to build?

This is a common challenge among retirees. They have the financial capacity to enjoy their retirement but find themselves paralyzed when it comes time to actually spend. This article explores the psychological barriers to spending in retirement and offers a five-step framework to help shift your mindset and make the most of your golden years.

Why Spending in Retirement Feels So Difficult

Even after reaching financial independence, many retirees find themselves reluctant to spend. One financial planner shared the story of a client who hesitated to buy a $5 bag of M&Ms—despite having more than enough money to afford it.

This hesitation often stems from deeply ingrained habits developed during earlier life stages. For those who lived frugally, survived financial hardship, or were taught to value saving above all else, shifting into a “spending mode” in retirement feels counterintuitive even dangerous.

What begins as financial discipline can turn into unnecessary deprivation if left unexamined.

A 5-Step Framework to Overcome the Spending Block

Here’s a practical process to help you shift from scarcity to intentional spending:

1. Acknowledge Your Feelings

The first step is simply recognizing that the discomfort around spending is real. Understand that your reluctance often stems from past financial experiences many of which are no longer relevant to your current reality.

2. Evaluate the Usefulness of Old Habits

Ask yourself: Is this saving behavior helping me now, or is it preventing me from living fully? Holding on to an outdated mindset can limit your happiness and freedom in retirement.

3. Identify What Truly Matters to You

Pinpoint the values that matter most—health, family, travel, education, or charity. Aligning your spending with these personal values makes it easier to use your money meaningfully.

4. Create Systems That Make Spending Easier

Instead of wrestling with every financial decision, build systems that remove friction. For example, open a separate “fun” or “travel” account at the beginning of the year and fund it in advance. When the time comes to book a trip or enjoy an experience, the money feels “already spent” freeing you from decision fatigue.

5. Surround Yourself With Encouragement

Spouses, friends, or social groups can gently challenge your instincts to save every penny. One guest, James, credited his wife Ashlynn for helping him enjoy dinners out and travel, which he would’ve otherwise skipped. These shared experiences created lasting joy and stronger relationships.

One Tactical Tip: Pre-Allocate Your Funds

Ben, a podcast guest, offered a game-changing strategy: withdraw money annually for your lifestyle spending categories and put it into a separate, easy-access account. This reduces the emotional resistance of withdrawing from your portfolio multiple times a year.

Whether it’s a vacation, home project, or family gift, earmarking funds ahead of time allows you to spend with clarity and purpose without anxiety.

Final Thoughts: It’s Time to Enjoy What You’ve Built

Retirement should be about freedom not financial fear.

If you’ve spent decades saving and investing, don’t let psychological barriers keep you from enjoying the life you’ve prepared for. The shift from accumulation to decumulation isn’t just financial—it’s emotional and mental.

By acknowledging your feelings, aligning spending with your values, and building practical systems, you can move past the guilt and start embracing the life you’ve earned.

You didn’t save all this money to die with it you saved it to live with it.

The post How to Overcome the Mental Block of Spending in Retirement appeared first on ROI TV.

Should Social Security Benefits Be Taxed?

James Conole — Sat, 24 May 2025 11:38:28 +0000

1. How Did We Get Here? A Brief History of Social Security Taxation

When Social Security was launched in 1935, benefits were entirely tax-free. That remained true for nearly five decades, until 1983, when legislation was passed to tax a portion of benefits for higher-income earners. This marked the introduction of the “provisional income” formula, which determines whether a retiree’s Social Security benefits are subject to federal income tax.

Set in 1984, the provisional income thresholds were $25,000 for single filers and $32,000 for married couples. However, these thresholds were never indexed for inflation. While $25,000 in 1983 is roughly equivalent to $80,000 today, the thresholds remain unchanged. The result? A growing number of retirees find themselves paying taxes on their Social Security benefits. Originally intended to affect fewer than 10% of beneficiaries, the rule now impacts nearly 50%.

2. What Does Trump Propose? No Taxes on Social Security Benefits

Former President Trump has publicly stated that Social Security benefits should not be taxed, aligning with a long-standing party platform to protect Social Security and Medicare without reducing benefits. Trump argues that taxing benefits constitutes double taxation: retirees paid into the system via payroll taxes and are now taxed again when collecting those benefits.

While this proposal sounds appealing, especially to retirees who rely on Social Security for the majority of their income, the primary beneficiaries would be middle- to high-income retirees. Most lower-income seniors are already below the provisional income thresholds and don’t pay taxes on their benefits.

3. What Happens If We Eliminate These Taxes?

Removing federal taxes on Social Security would undeniably increase take-home income for retirees. Considering that about half of all retirees depend on Social Security for at least 50% of their retirement income, this change would offer significant financial relief.

However, this move comes with a cost. In 2020 alone, roughly $100 billion was added to the Social Security Trust Fund through the taxation of benefits. Eliminating this source of revenue would accelerate the depletion of the Trust Fund, already projected to be exhausted by 2034. Without intervention, that could lead to a 20% reduction in benefits across the board. Experts estimate that ending the taxation of benefits would move up the Trust Fund depletion date by approximately one year.

And it’s not just Social Security. The Medicare Trust Fund would also face strain, with a projected six-year acceleration in its depletion timeline.

4. Can Social Security Be Saved? Possible Policy Solutions

The Social Security Trust Fund currently holds between $2.7 and $2.8 trillion. But as more baby boomers retire and birth rates remain low, fewer workers are contributing to the system relative to the number of retirees drawing from it.

Several policy changes are under consideration:

Raising the wage cap: Currently, only income up to $176,100 is subject to Social Security payroll tax. Lifting or eliminating this cap could boost the fund.
Increasing payroll tax rates: A small increase across all income brackets could generate billions.
Pushing back the full retirement age: Currently set at 67 for those born in 1960 or later, raising the age could reduce long-term payout obligations.

Each option has trade-offs, but the goal is to ensure solvency without undercutting retirees’ financial security.

5. Balancing Fairness with Sustainability

Eliminating taxes on Social Security benefits could correct what many see as an unfair system of double taxation. But doing so without a plan to replace that lost revenue risks jeopardizing the long-term viability of the entire program.

Ultimately, the conversation around Social Security taxes underscores a bigger issue: the need for a sustainable, fair, and forward-thinking retirement system. Adjusting provisional income thresholds for inflation, reforming benefit structures, or gradually increasing contributions are all being discussed as ways to ensure that Social Security remains a reliable source of retirement income for generations to come.

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How to Pay $0 in Taxes in Retirement

James Conole — Wed, 21 May 2025 09:19:22 +0000

As you approach or enter retirement, how you withdraw your money can be just as important as how you saved it. By understanding how different income sources are taxed and strategically managing withdrawals, retirees can significantly reduce their lifetime tax burden. Here are the key strategies for optimizing your taxes in retirement.

Tax Optimization in Retirement

Your retirement tax rate isn’t fixed—you can control it through smart planning. Strategic withdrawals from pre-tax accounts, Roth accounts, and brokerage accounts can help you stay within favorable tax brackets and even qualify for 0% long-term capital gains rates. For example, married couples filing jointly in 2025 can have taxable income up to $96,700 and still qualify for a 0% federal tax rate on long-term capital gains and qualified dividends.

Brokerage Accounts and the 0% Capital Gains Zone

Standard brokerage accounts may not offer tax-deductible contributions, but they provide unique tax planning opportunities in retirement. If your taxable income is below the $96,700 threshold, you can realize up to $26,700 in long-term capital gains tax-free. With proper timing and income management, reinvesting these gains also resets your cost basis, helping reduce future tax liability.

401(k)s and Roth 401(k)s: Know Your Brackets

Choosing between a traditional and Roth 401(k) hinges on your current and expected future tax brackets. Roth contributions are taxed now but grow and withdraw tax-free later. Traditional contributions are pre-tax but taxable upon withdrawal. Also, employer matches are almost always pre-tax. For retirees who give charitably, Qualified Charitable Distributions (QCDs) from traditional IRAs after age 70½ can reduce taxable income and satisfy Required Minimum Distributions (RMDs).

HSAs: A Triple Tax Advantage

Health Savings Accounts (HSAs) are an underrated tool in retirement. They offer a triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. After age 65, you can also use HSA funds for non-medical expenses without penalty (though income taxes apply, similar to a traditional IRA). For retirees facing rising healthcare costs, HSAs offer unmatched flexibility and tax efficiency.

Inheritances and Strategic Withdrawals

Inherited non-retirement assets receive a step-up in basis, erasing capital gains accrued during the decedent’s life. However, inherited IRAs and 401(k)s must be fully withdrawn within 10 years under current law. Spreading withdrawals over the full period and coordinating with your tax situation can prevent large spikes in taxable income and protect more of your inheritance.

Social Security: Timing is Everything

Up to 85% of your Social Security benefits may be taxable depending on your provisional income, which includes half your benefits plus all other taxable income and some non-taxable interest. With careful planning, you can time Social Security collection and manage withdrawals from other accounts to minimize the taxable portion. In most states, Social Security benefits are not taxed at all.

A Holistic Approach to Retirement Tax Planning

The best results come from coordinating your withdrawal strategy across all account types—traditional, Roth, HSA, brokerage, and inherited accounts—while staying mindful of Social Security taxation and charitable goals. Retirement isn’t just about having enough; it’s about using what you have wisely to maximize income, reduce taxes, and ensure long-term financial security.

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Retirement Spending Patterns and Portfolio Strategies

James Conole — Sat, 17 May 2025 12:06:25 +0000

Retirement is an exciting new chapter in life, but it also comes with financial challenges that require thoughtful planning. Understanding how spending patterns change over time, how to balance portfolio strategies, and how to maintain financial security and flexibility are essential to enjoying retirement to the fullest. Let’s explore key insights from a recent discussion on retirement strategies.

Changing Spending Patterns in Retirement

Spending in retirement isn’t static; it evolves as life circumstances change. The early years of retirement, often called the “go-go years,” are typically marked by higher expenses due to increased activity, travel, and personal pursuits. As retirees age, expenses generally decrease. Research shows that by age 84, retirees spend approximately 25% less in real terms compared to their initial retirement spending. One study by Chase, analyzing data from five million households, found that spending rises by about 2% in the early years of retirement, slows to 0.5% in mid-retirement, and declines significantly in later years, with healthcare costs becoming the primary expense.

Importance of Tracking Expenses Before Retirement

One of the most crucial steps before retirement is to track your expenses, ideally starting five years before retiring. This period allows you to get a clear picture of your day-to-day expenses and major costs like home maintenance or vehicle replacements. Erin recommends paying off your home before retirement to reduce financial strain. By tracking expenses early, you can better plan for unexpected costs, helping you enter retirement with confidence and fewer surprises.

Inflation and Retirement Spending

Inflation is often viewed as a major retirement threat, but it doesn’t affect every expense equally. For homeowners, housing costs may remain stable, unlike rent or other fluctuating expenses. Retirees often adjust their lifestyles—dining out less or choosing more budget-friendly vacations—to counter inflation. Real spending in retirement tends to grow at a slower rate than inflation, as retirees naturally cut back on discretionary spending over time.

Social Security and Portfolio Management

Social Security forms a significant part of retirement income, particularly for higher earners in dual-income households, where benefits can range from $2,000 to $4,000 per month. Planning for uneven income flows is crucial. For instance, delaying Social Security until age 70 can maximize benefits but may put greater demand on your investment portfolio during early retirement. Balancing Social Security, pensions, and investment withdrawals allows for a more tailored approach to changing financial needs.

Investment Strategy for Retirement

Maintaining portfolio growth during retirement is essential, and that often means keeping a strong equity presence. Erin suggests that retirees should maintain at least 50% of their portfolio in stocks to protect against inflation and ensure long-term growth. Bonds and cash act as a safety net, while equities drive growth. A practical strategy is to maintain a “cash bucket” of 2-5 years of living expenses, allowing for flexibility during market downturns without needing to sell investments at a loss.

Flexibility in Spending and Withdrawal Rates

Being flexible with spending is key to preserving wealth. Making small adjustments, like reducing annual expenses by $5,000, can significantly impact long-term security. While the 4% withdrawal rule is a useful guideline, it’s not a hard rule. Exceeding this rate during high-expense years is acceptable as long as the portfolio is robust enough to handle it. Instead of rigidly adhering to a single rule, focus on your unique financial situation and adapt as needed.

Practical Implications of Retirement Research

No two retirements are the same, and research underscores the need for personalized planning. Early retirement may involve higher withdrawals due to increased spending and postponed Social Security benefits. As retirees age, their portfolio demands typically decrease, allowing for a more conservative approach. Balancing your investment strategy to match income flow and spending changes ensures lasting financial security.

Enjoying Retirement

Retirement isn’t just about managing finances; it’s about living well. Erin stresses the importance of not being overly cautious with your savings. After years of hard work, it’s important to use your savings to create memorable experiences, like traveling or spending time with loved ones. The goal is to find a balance between financial security and enjoying life.

Conclusion

Retirement planning is about more than just saving; it’s about understanding how spending patterns change, leveraging social security and investments wisely, and remaining adaptable. By tracking expenses early, maintaining a balanced portfolio, and being flexible with withdrawals, retirees can achieve both security and fulfillment in their later years. Most importantly, remember that retirement is your time to enjoy the fruits of your labor—plan well and live well.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost

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Why Retiring at 65 May Be a Mistake

James Conole — Sun, 11 May 2025 00:32:20 +0000

When most people think about retirement, the age of 65 often seems like the finish line. It’s the age when Medicare kicks in and Social Security benefits are fully accessible for many. But what if I told you that retiring at 65 might be a mistake? I want to share with you some insights that might completely change how you think about your golden years.

The Hidden Risks of Retiring at 65

Retiring at 65 might seem like the ideal plan, but there are some hidden risks that many people overlook. The primary risk isn’t financial—it’s underestimating life expectancy and, more importantly, healthy life expectancy.

Now, this is important. In the U.S., the average healthy life expectancy is just 66.1 years. That’s the age at which the average person begins to experience significant health issues that may limit their ability to travel, golf, or even just get around comfortably. In contrast, places like Japan (74 years) and Italy (72 years) have much higher healthy life expectancies. This gap is important because it means that many Americans might only get one or two good years of retirement before health problems set in.

Scott and Brooke’s financial plan showed a high probability of financial success if they retired at 65, but the real risk was focusing too much on financial projections and not enough on the quality of life during retirement. What good is financial stability if you’re not physically able to enjoy it?

Prioritizing Healthy Life Expectancy

Think about this: healthy life expectancy is the number of years you can expect to live in good health—not just alive, but really living. This is what allows you to travel, enjoy hobbies, and spend time with family without physical limitations.

Here’s the reality: the U.S. ranks poorly compared to other developed countries in terms of healthy life expectancy. But the good news? It’s largely within your control. Exercise, diet, and lifestyle choices can significantly extend the number of years you spend in good health.

I’m reminded of the Confucius quote:
“A healthy person has a thousand wishes, but a sick person has only one.”

It really drives home the point: health is everything when it comes to enjoying your retirement.

The Role of Exercise in Retirement Planning

If you want to be part of the group that truly enjoys retirement, exercise isn’t optional—it’s essential. Regular exercise benefits you both now and in the future by improving physical and mental health, extending your life span, and, most importantly, your health span.

Here’s a sobering statistic: 77% of Americans don’t exercise regularly. That’s a massive missed opportunity. Exercise isn’t just about adding years to your life; it’s about adding quality to those years. When you make exercise a priority, you’re investing in your ability to enjoy travel, pursue hobbies, and stay independent in retirement.

If you want to retire well, it starts with being part of that 23% who prioritize health.

Practicing Retirement Before You Actually Retire

One of the smartest strategies I’ve seen is practicing retirement before you actually take the plunge. Scott and Brooke’s experience showed how important this is. They started traveling more, playing sports like pickleball, and volunteering well before they officially retired.

Why? Because trying out your retirement lifestyle early helps you understand what you enjoy, what you don’t, and where you want to spend your time. It’s like taking a test drive for your golden years. When you do this, you avoid that feeling of uncertainty or loss of direction that so many new retirees experience.

The Power of a Good Retirement Plan

Many people push retirement back to 65 or even later simply because they haven’t planned properly. They work through some of their healthiest years, postponing travel, adventure, and family time until it’s too late.

When Scott and Brooke ran their financial projections, they realized they could retire at 63 instead of 65. They could still maintain a high probability of financial success while gaining two extra years of good health to enjoy their passions. All it took was proper planning and running the numbers.

If you haven’t done this yet, I can’t recommend it enough. A well-structured retirement plan can help you balance enjoying life now while still securing your future.

Key Takeaways for Smarter Retirement Planning

If there’s one thing to remember, it’s this:
Don’t wait for the “perfect time” to enjoy your life.

Here are the key points to consider:

Prioritize Health Now – Exercise regularly to improve both your life span and health span.
Practice Retirement Activities Early – Figure out what you enjoy now, so you can hit the ground running when you retire.
Create a Realistic Retirement Plan – Run projections, explore different scenarios, and find the optimal age for your personal situation.
Balance Living for Today and Planning for Tomorrow – Don’t sacrifice your healthiest years just to hit a financial target.

When you take these steps, you might find that retiring at 65 isn’t the dream you once thought it was. Maybe it’s 63, maybe it’s 62, or maybe it’s even 60. The important thing is that you enjoy those years while you still have the health and energy to do so.

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How to Earn $100,000 in Retirement and Pay $0 in Federal Taxes

James Conole — Wed, 07 May 2025 11:27:10 +0000

It sounds too good to be true—but with the right planning, retirees can legally earn $100,000 a year and pay $0 in federal income taxes.

This isn’t about tax loopholes or fancy tricks. It’s about understanding how the IRS treats different income sources and layering them smartly to stay under key tax thresholds.

Let’s walk through how Joe and Sally, both retired at 67, make it happen—while enjoying a secure, tax-efficient retirement.

1. The Big Picture: $100,000 in Tax-Free Income

Joe and Sally’s plan includes income from:

Social Security
Qualified dividends
Traditional IRA withdrawals
Long-term capital gains
Roth IRA for flexibility (but not needed for this specific plan)

They generate $100,000 per year by mixing these income sources—without triggering federal tax liability. Here’s how they do it.

2. Social Security and the Power of Provisional Income

Joe and Sally receive $62,400/year from Social Security ($3,200/month for Joe, $2,000/month for Sally).

Now here’s the trick: Social Security isn’t automatically taxable. It depends on provisional income, which includes:

50% of Social Security benefits
Taxable IRA withdrawals
Dividends and capital gains

At first, their provisional income is low enough that none of their Social Security is taxed. As they add other income, only $20,280 of it becomes taxable—which is still offset by deductions.

3. Dividend Income: Taxed at 0%

Their brokerage account (worth $500,000) produces $10,000/year in qualified dividends (2% yield).

Because their taxable income remains under $96,700, they’re in the 0% capital gains tax bracket, meaning those dividends are taxed at 0%.

So, that $10,000 in dividend income? It’s all tax-free.

4. IRA Withdrawals: Keep It Modest

Joe and Sally also have $650,000 in traditional IRAs. To meet their spending needs, they withdraw $11,600/year—just enough to supplement income without inflating their taxable income too much.

Traditional IRA withdrawals are taxed as ordinary income—but here’s where the standard deduction comes in…

5. Using the Standard Deduction Wisely

As a married couple filing jointly in 2025, Joe and Sally can claim a $33,200 standard deduction (includes the 65+ senior bonus).

That means their $11,600 IRA withdrawal + $20,280 of taxable Social Security = $31,880 in taxable income—which is fully offset by the standard deduction.

Result? $0 in taxes owed.

6. Long-Term Capital Gains: More Tax-Free Income

To reach their $100,000 annual income target, Joe and Sally sell stocks for $8,000 in long-term capital gains each year.

As with their qualified dividends, these gains fall under the 0% long-term capital gains rate since their taxable income remains under the $96,700 threshold.

More income—still no taxes.

7. What About the Roth IRA?

They also have $150,000 in Roth IRAs, which can be tapped tax-free if needed. But in this scenario, they don’t need to use them. The Roth remains a great fallback option—especially if unexpected expenses arise or tax laws change.

8. Long-Term Strategy: Not Just One Year

While this plan focuses on the current year, the goal is broader: minimize taxes over their lifetime.

Key points of the long-term strategy:

Keep taxable income low early in retirement
Delay large IRA withdrawals until RMDs are required (at age 73+)
Use Roth IRAs to bridge gaps if needed
Consider Roth conversions in low-income years
Monitor income thresholds to avoid triggering taxation on Social Security

This forward-looking mindset ensures Joe and Sally avoid tax surprises in later years—and stretch their nest egg further.

Final Thoughts: Planning Pays Off

Generating $100,000 a year in retirement with zero taxes owed isn’t luck. It’s the result of intentional planning:

Mixing income types
Staying below tax thresholds
Maximizing the standard deduction
Planning ahead for the next 20–30 years

With smart decisions today, you can enjoy more freedom, flexibility, and financial peace tomorrow.

The post How to Earn $100,000 in Retirement and Pay $0 in Federal Taxes appeared first on ROI TV.

Should You Work One More Year? The Trade-Offs Between Money, Health, and Time

James Conole — Sat, 03 May 2025 13:54:00 +0000

When you’re 67 and looking at retirement, one big question looms: Should I retire now, or work one more year?

It’s a question Kurt and Eva recently faced—and their story may sound familiar. With over $1 million saved, no mortgage, and a desire to travel while they’re still active, they wondered if one more year of work was worth the stress or just extra dollars they might not need.

Let’s look at what they learned—and how their story can help you weigh the financial and personal trade-offs of retiring today versus waiting another year.

1. What Happens If You Work Just One More Year?

The numbers are compelling. For Kurt and Eva, working one more year meant:

Over $200,000 in additional income
An 8% increase in Social Security benefits from delaying until age 68
Additional 401(k) contributions and portfolio growth
A jump in their retirement plan’s success rate from 83% to 93%

That’s not small. From a purely financial standpoint, one more year of work can dramatically improve long-term retirement security.

2. But What About Health, Happiness, and Time?

Here’s where the conversation got personal.

Kurt and Eva admitted they’re not in the best of health. Stress from work has been weighing them down, limiting their ability to enjoy life now. They’ve lost coworkers who passed away before getting to enjoy retirement. They don’t want that to be their story.

They want to travel, to spend more time together, and to finally prioritize their well-being. And they’re not alone—many people in their late 60s wrestle with this balance: “Can I afford to stop working now, and if I do, what will I miss financially?”

The real question is: What will you miss personally if you don’t?

3. The Power of Adjusting Spending in Retirement

Here’s where the magic happens in planning.

Instead of working longer, Kurt and Eva considered adjusting their retirement spending pattern to reflect how real life tends to work. They planned to:

Continue spending $8,000 per month (including $2,000 for travel) for the first 10 years of retirement
Gradually reduce spending in their late 70s and 80s as travel slows

This simple adjustment significantly increased their retirement plan’s success rate—without requiring them to keep working.

It turns out, spending is rarely flat for 30 years. Retirement often follows a “go-go, slow-go, no-go” pattern, where spending drops naturally as you age. Planning for that curve can reduce your financial burden without cutting back on experiences you actually care about.

4. What If They Worked Until 80?

Just for comparison, Kurt and Eva reviewed an extreme scenario: Work until 80, delay Social Security to age 70, save aggressively, and keep travel expenses low.

The result?

100% probability of financial success
An estimated $4.5 million in total portfolio value

Sounds impressive, right? But at what cost?

That plan would mean giving up travel while they’re still healthy, missing out on freedom and flexibility, and likely compromising their quality of life now. In their case, the cost of waiting was more than financial—it was personal.

5. The Right Balance: Financial Peace and Personal Fulfillment

Ultimately, Kurt and Eva chose to retire now, but with a realistic and flexible spending plan that allows for:

Plenty of travel early on
Adjustments later based on actual needs
A safety net (selling their home if needed) to support long-term success

Their plan reflects a deeper truth: retirement isn’t about maximizing dollars—it’s about maximizing life.

They realized they didn’t have to choose between security and joy. With smart planning, they could have both.

Final Thoughts: Ask Yourself These Questions

Are you working longer because you need to—or because you’re afraid to stop?
What would one more year of work add to your finances—and what might it take away from your life?
Can you adjust your spending to make retirement work now, rather than later?

Every retirement plan is different, but the best ones always blend financial reality with personal values.

Don’t build a retirement around what you’re afraid of. Build it around what you love.

The post Should You Work One More Year? The Trade-Offs Between Money, Health, and Time appeared first on ROI TV.

How to Plan for Retirement Without Sacrificing the Life You Want Today

James Conole — Wed, 30 Apr 2025 13:14:03 +0000

Retirement planning isn’t just about reaching a number—it’s about striking the right balance between living well today and being financially secure tomorrow. That balance isn’t always easy to find. Save too little, and you risk outliving your money. Save too much, and you might miss out on meaningful experiences along the way.

So how do you plan for a successful retirement without over- or under-shooting? Here’s a breakdown of how to find your number, manage the tradeoffs, and build a plan that lets you live comfortably—now and later.

1. Save Enough, But Not Too Much

The goal of saving for retirement is to ensure future security, but once you’ve reached a point of stability, saving more than you need can actually cost you valuable time and experiences.

Under-saving may lead to financial hardship in your 70s, 80s, or 90s. Over-saving may keep you working longer than necessary, with extra funds that don’t meaningfully improve your retirement lifestyle.

The sweet spot is somewhere in between—enough to fund the retirement you want, not so much that you delay living your life today.

2. Use This Simple Formula to Find Your Retirement Target

Let’s say you want to spend $6,000 a month in retirement and expect $2,000 per month from Social Security. That leaves a $4,000 monthly gap, or $48,000 annually, that needs to come from your savings.

Adjusting for 10 years of inflation (at 3%), that becomes about $64,500 per year.

Using the 4% withdrawal rule, you’d need a retirement portfolio of: $64,500 ÷ 0.04 = $1.612 million

That’s your target to generate sustainable income over a 30-year retirement.

3. Growth Assumptions and the Savings Gap

Now let’s say you already have $750,000 saved and you’re expecting a 6% annual growth rate. Over 10 years, your portfolio might grow to $1.3 million—a solid amount, but still $270,000 short of your goal.

Depending on your time frame and assumptions, this gap may be manageable. For example:

Starting with $500,000? You might need to save $4,500/month.
Starting with $1.2 million? You might not need to save anything more.

4. Don’t Forget Taxes

The type of accounts you withdraw from in retirement matters—a lot.

Let’s look at Tina, who needs $84,000/year after taxes. If her money is in a traditional IRA, she might need to withdraw $117,000/year to net that amount—thanks to income taxes.

That’s a 7.3% withdrawal rate, which would deplete her portfolio by age 82.

But if the funds were in a Roth IRA, those withdrawals would be tax-free. Tina’s portfolio could last until age 90, just by avoiding taxes. This is why tax efficiency is a critical part of retirement planning.

5. Plan for Uneven Spending in Retirement

Retirement isn’t a straight line. Most people spend more early on—traveling, renovating homes, or helping with grandchildren—then slow down later.

Tina, for instance, spends $10,000/month in her first five years of retirement, including $3,000 on travel. After that, her spending drops to $7,000/month. This change alone improves her financial outlook dramatically.

Being realistic about your spending phases can make your retirement plan more accurate and sustainable.

6. The Retirement Spending Smile

This concept, supported by retirement research, shows that retirees often decrease spending over time. Instead of increasing expenses with inflation every year, you might reduce spending naturally during the “slow-go” and “no-go” years.

Adjusting Tina’s spending growth from 3% to just 2% annually improved her success probability from 63% to 84%.

Lesson? You don’t always need to plan for increasing costs. Sometimes, less is more.

7. Life Expectancy Matters More Than You Think

Life expectancy assumptions dramatically affect how much you need to save.

If Tina plans for a 100-year life, her success rate drops. If she only expects to live to 80, her odds jump to 99%. That’s a wide range, and while no one can predict the future, it’s important to plan for longevity—especially with improved healthcare and longer average lifespans.

8. Work Longer—or Adjust Spending

If Tina continues working until age 68 or 69 and continues saving, her chances of success rise significantly. But interestingly, adjusting her spending in the early years of retirement can offer a similar boost—without the extra years of work.

This is where a detailed, personalized retirement plan makes all the difference. The right choices—like reducing early travel or adjusting inflation assumptions—can help you retire sooner without giving up your lifestyle.

The Bottom Line

Retirement planning isn’t just about hitting a number. It’s about building a plan that supports both your future security and your present happiness.

Start with a realistic estimate of how much you’ll need. Factor in inflation, taxes, and life expectancy. And most importantly—design your retirement around your life, not just your finances.

A smart retirement plan allows you to enjoy your time, stay healthy, and leave worry behind—exactly what this next chapter of life should be about.

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