A few weeks ago, I shared a few misconceptions about retirement that I commonly hear, along with some thoughts on how advisors could help keep their clients from falling into those traps. Today I’ve got another retirement myth to crack. How many times have you heard a client say some version of the following: “If my spouse dies, my expenses will be reduced by 50%”?
If you’re like me, you’re probably sick of hearing people say “YOLO” – a slang acronym for the phrase “you only live once.” It’s applied to everything these days, from making the life-changing decision to leave a job to allowing yourself to indulge in a decadent dessert that you know is bad for you. It’s an overused term and has almost become something of an excuse or justification for throwing caution to the wind and making impulsive choices. It might be especially tempting for some to apply YOLO to their finances. Should I buy that second house? YOLO! Should I make that risky investment? YOLO! Should I save my bonus or treat myself? YOLO!
But think about it this way: it is true that you only live once, but it is also true that you only retire once—YORO. With just one shot at a long, healthy and satisfying retirement, we have to do whatever it takes to make sure we don’t waste it. If you’ve got clients who are prone to apply the YOLO method to their finances, encourage them instead to embrace the YORO mindset.
When it comes to retirement savings, everyone wants to know the quick and easy answers to these common questions: “How much do I need to save in order to retire?” and “Do I have enough?”
We’re all trying to determine the magic number of how much income we need in retirement, but the problem is that we are all different. We lead different lifestyles, we each have our own income needs, we envision our retirement in our own way and, to be blunt, we each have a unique, unknown life expectancy.
No matter how hard we may want to resist it, all of us will continue to get older each and every day. As we age, and as our parents and children age in tandem, our financial considerations, plans and fears evolve as well.
Exacerbating the situation is the changing landscape of retirement—Social Security has undergone modifications, people are planning to work for a longer period of time and saving for retirement has all too often been relegated to the back burner in favor of other large ticket events. It’s also worth mentioning again that it is easy to underestimate how much we really need to save for retirement, given that life expectancy has increased over time and that the multi-generational household is on the rise.
Earlier this month, Punxsutawney Phil, our trusty weather forecasting groundhog, predicted an early spring, which is good news for those who are sick of the cold and snow. Weather aside, his Groundhog Day prediction is also a sign that tax season is officially upon us, and that April 15 will be here sooner than we realize. Now’s as good a time as any for financial advisors to make sure their clients are aware and informed about the landscape of their retirement tax situation, which has a few particulars that can sometimes be overlooked and therefore not accounted for when retirement planning.
Financial advisors can use tax season as catalyst to discuss with their clients three reminders about taxes in our older age: