Once your regular paycheck stops coming in, your retirement money still has a lot of jobs to accomplish over the rest of your life.

How often do you see a retired couple depicted like this couple on the beach?

It paints a very rosy picture of retirement, doesn’t it?

Let’s consider “the rest of the story” of what jobs your money may need to accomplish once you retire.

Every Day is a Saturday

Many of us have heard that “Every Day is a Saturday” once you retire. Now that you have stopped working in your career job, you have time Monday through Friday to do some of the things you’ve always done on Saturdays.

Let’s take this a little further.

The Household Expense Job

Is your mortgage paid off? Even if it is, you may need to consider that you could still be paying real estate taxes, property insurance, utilities, and association dues, all of which may inflate.

Many retirees finally get around to those home projects they’ve always wanted to do. They start remodeling their kitchens and bathrooms, finishing the basement, and upgrading household furniture. Or, now that they are home more, they may put money into landscaping, adding or remodeling decks and patios, and purchasing outdoor furniture.

The Living Expense Job

Will you dine out more or less now that you are retired? Will you buy more or less groceries?

How about clothing? Will you purchase clothing for different purposes?

Do you want to join a club or start a new hobby? Interested in taking up a sport or going to sporting events?

What about your vehicle? Do you want to drive nicer cars?

Remember, inflation is still at work behind the scenes. Your retirement money for these living expenses may need to be flexible.

The Vacation & Travel Job

As a retiree, you will likely have more time to travel and visit family. How will your vacation and travel budget change now that you’re retired?

The Healthcare Job

Many retirees underestimate the costs needed for healthcare. Medicare may pay for about two thirds of your medical costs; however, out-of-pocket healthcare costs like premiums, copays, and deductibles can add up. Medicare typically does not cover vision, hearing, dental care, and some prescription drugs. Your retirement money may need to take these potential expenses into account.

Retirees counting on Social Security Benefits to cover living and lifestyle expenses are often surprised at the percentage of their benefits that may be used to cover their healthcare needs.

Several factors may impact future healthcare expenses including number of years in retirement, gender, location, and the impact of health conditions on longevity and expected costs.

The Extended Care Job

Without a plan, an extended care event has the potential to drain retirement assets. Many aging adults and their families are unfamiliar with what long-term care is, who provides the care, who pays for care, and what the costs of that care are.

For more information, please download our Long-Term Care Planning Guide below.

The Taxes Job

Many factors may impact the taxes you will pay once you retire. Form 1040 is the U.S. Individual Income Tax Return that must be filed every year.

Just because a paycheck stopped coming in doesn’t necessarily mean you will stop paying taxes. Let’s look at one of those income streams that may require payment of taxes in retirement.

Money sitting in tax-deferred accounts means that money was earned, but the taxes have not been paid. As the money is withdrawn from those accounts, taxes are paid at the tax rates and brackets in the tax code at the time of the distribution. Those distributions show up as income on Form 1040 and will be taxed at the federal tax level.

There are nine states with no income tax and an additional four states that do not tax retirement income. Otherwise, distributions from your tax-deferred accounts will also be included on your state’s tax return for state tax purposes.

Required Minimum Distributions

If you wait until you are 73 years old, the government generally requires you to take distributions from your tax-deferred accounts. These are called Required Minimum Distributions (RMD), and the dollar amount to be distributed is typically calculated according to the IRS Uniform Lifetime Table.

To calculate your RMD, you take the total account balances as of December 31 of the prior year, divide that by the Life Expectancy Factor per the IRS Uniform Lifetime Table. If you have multiple accounts of tax-deferred savings, your RMD must be calculated based on the total of all your accounts. You may take an RMD from each account, or you may choose to take your RMD from just one of your tax-deferred accounts.

In addition to distributions from your tax-deferred accounts, other streams of income that may require the payment of taxes are:

• Social Security Benefits
• Pension Benefits
• Rental Income
• Investment Income
• Capital Gains
• Business Income
• Taxable Refunds, etc.

Don’t Worry Be Happy

I’ve always loved this song! This could be YOU in retirement.

Let’s get you started designing, building, and implementing your custom Comprehensive Financial Plan. I’d like to see you have the potential for all your retirement money to work according to its purpose and timeline for the rest of your life and into your legacy!