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Build Your Dream Retirement

Zoe Team

Mar 22, 2023

6 min read

A financial advisor reviewing a plan with two clients at a table

Key Takeaways

Successful retirement planning requires anticipating future needs and acting early.
Financial peace of mind is essential for enjoying the hard-earned fruits of your labor during retirement.
Dreaming big for your retirement years is only possible when your finances are structured to support those goals.

Frequently Asked Questions

What is the first step in planning for retirement?

The most important step is to anticipate your future needs and think about what you want your retirement years to look like.

Why is it important to stop worrying about finances in retirement?

Reducing financial stress allows you to focus on creating memories and enjoying the work you have put in throughout your career.

How can I ensure my retirement dreams become reality?

By setting clear goals, planning for your anticipated needs, and structuring your assets today to support those objectives later.

Your retirement years should be full of pure enjoyment, creating happy memories, and making the most of your hard work. The last thing you should do is worry about your finances. To turn these dreams into realities, you should anticipate your needs and think about where the money you need will come from.

Envisioning your Retirement

What comes to mind when thinking about retirement? Is it an image of you and your partner walking down a beach holding hands? Or laughing and sharing stories with your family? By understanding the inner workings of retirement income, you can enjoy retirement without worrying about finances.

Transitioning into Retirement

As you plan how to spend your retirement, remember that it includes both spending money and knowing where it will come from. Start by assessing your retirement needs and how you’ll cover them.

Anticipate Expenses

Think about all of your potential expenses, such as:

Home mortgage & maintenance
Property taxes and insurance
Car expenses (purchasing or leasing, ongoing costs)
Utility bills (cable, electricity, water, gas, heat)
Healthcare
Food & Dining
Transportation
Travel
Charitable contributions & gifts
Entertainment
Club fees and dues

Expenses fall into two broad categories:non-discretionary(essential needs) anddiscretionary(non-essential wants). Non-discretionary expenses are like building materials for a house—necessary and unavoidable. Discretionary expenses are like luxury items—nice to have but not critical.

Consider Your Lifestyle

Don’t underestimate costs. When planning for retirement, factor in inflation’s impact on your expenses. While there’s no fix for inflation, it’s crucial to consider how it erodes your purchasing power over time.

Establishing Retirement Income Sources

Begin by setting a budget and understanding how much will be allocated. Know your expenses and how to pull from various income sources, keeping inflation in mind.

Different income sources come with different tax implications. For example, Roth IRA withdrawals are tax-free, making them ideal for long-term growth and passing on to heirs. However, using Roth IRA funds early can be a mistake if you need tax-free growth.

Social Security

Social Security is a significant source of retirement income, with many Americans relying on their social security income to carry them through and help protect their longevity. Social Security can be claimed as early as age 62, but doing so means taking a significant cut on the social security income you’ll receive for the rest of your life.

Alternatively, you can elect to delay your benefits to age 70, and you get an 8% increase in your benefits for each year you delay past your full retirement age (FRA). Not only do you get an increased benefit, but you also get the annual cost of living adjustments that Social Security provides on the increased benefit amount for the rest of your life.

Avoid Dependency

Other sources of income that some people receive include a pension, deferred compensation plan, or the sale of a business. Pensions used to be how almost everyone retired. However, as companies have moved away from pension plans and more towards defined contribution plans, it’s increasingly important for people to focus on their savings rather than relying on a company to provide their retirement income.

Create Three Income Buckets

Investment income sources are our savings across various accounts and investment vehicles. You can control how you manage these savings, but there are still things you can’t control, so you must devise a strategic plan to liquidate and create the most tax-efficient retirement possible. As a result, you can begin to think about your overall assets in terms of three buckets:

In theliquid bucket, you will have approximately two years’ worth of expenses in readily accessible and liquid vehicles. These can include cash, money market, treasury bills, laddered CDs, and anything highly liquid and accessible with little to no investment risk.
Theincome bucketis where you will have seven to ten years’ worth of expenses in income-producing, relatively low-risk (as measured by standard deviation) investments- such as municipal bonds, corporate bonds, treasury notes, annuities, rental properties, and the like. The income produced in this bucket should be used to fund the liquidity needs in the liquid bucket.
Thegrowth bucketis where you will have growth-focused assets such as stocks, REITs, MLPs, hedge funds, private equity, businesses, and other similar asset types. These assets, which you expect to grow over time, will help counteract inflation and fund the income bucket as the assets appreciate.

There are going to be investment events that you must also plan for. For example, starting at age 73, you will have Required Minimum Distributions, the minimum required amounts a retiree must draw annually from any tax-deferred accounts they have – such as a traditional IRA or 401(k). In addition, every dollar withdrawn will be subject to income taxes, which could substantially impact the amount of cash needed to cover total expenses.Therefore, adjusting and rebalancing your three buckets as often as necessary and at least twice a year is essential to keep pace with spending changes.

If it sounds like there are many pieces to fit together a solid retirement income puzzle – it’s because there are. Plus, there are so many nuanced rules that vary state by state that it becomes even more critical to work with a qualified fiduciary and financial advisor and ensure you take everything into account!

The Best Part of Building Your Dream Lifestyle Is Enjoying It!

After you stop working, you open the door to a new stage of your life where worry is the last thing you should do. Having a plan for retirement income that accounts for your expected expenses is the best way to help ensure you meet your needs and goals. Don’t wait until it’s too late to build the retirement of your dreams. You have everything you need! It’s just a matter of planning for the best years ahead.

Envisioning your Retirement

Transitioning into Retirement

As you plan how to spend your retirement, remember that it includes both spending money and knowing where it will come from. Start by assessing your retirement needs and how you’ll cover them.

Anticipate Expenses

Think about all of your potential expenses, such as:

Home mortgage & maintenance
Property taxes and insurance
Car expenses (purchasing or leasing, ongoing costs)
Utility bills (cable, electricity, water, gas, heat)
Healthcare
Food & Dining
Transportation
Travel
Charitable contributions & gifts
Entertainment
Club fees and dues

Consider Your Lifestyle

Establishing Retirement Income Sources

Begin by setting a budget and understanding how much will be allocated. Know your expenses and how to pull from various income sources, keeping inflation in mind.

Social Security

Avoid Dependency

Create Three Income Buckets

In theliquid bucket, you will have approximately two years’ worth of expenses in readily accessible and liquid vehicles. These can include cash, money market, treasury bills, laddered CDs, and anything highly liquid and accessible with little to no investment risk.
Theincome bucketis where you will have seven to ten years’ worth of expenses in income-producing, relatively low-risk (as measured by standard deviation) investments- such as municipal bonds, corporate bonds, treasury notes, annuities, rental properties, and the like. The income produced in this bucket should be used to fund the liquidity needs in the liquid bucket.
Thegrowth bucketis where you will have growth-focused assets such as stocks, REITs, MLPs, hedge funds, private equity, businesses, and other similar asset types. These assets, which you expect to grow over time, will help counteract inflation and fund the income bucket as the assets appreciate.

The Best Part of Building Your Dream Lifestyle Is Enjoying It!

Disclosures: Zoe Financial, Inc. ("Zoe Financial") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Zoe Financial provides investment advisory services and access to independent registered investment advisers through its platform. The information provided by Zoe Financial is for educational and informational purposes only and should not be construed as personalized investment advice or as an offer to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Clients should consult with their own financial, tax, or legal professionals before making any investment decisions. The material presented by Zoe Financial is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Past performance is no guarantee of future results. Zoe Financial does not provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice. SEC Registration does not constitute an endorsement of Zoe Financial by the SEC nor does it indicate that Zoe Financial has attained a particular level of skill or ability. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be appropriate for all clients. Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance. Lower expenses do not guarantee better investment performance. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements.

Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.

The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.

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