Financial Advisor in Santa Rosa: Want to Retire Early?

Financial Advisor in Santa Rosa: Want to Retire Early?

Can you retire early? It depends…

With all that’s going on in the world (e.g., pandemic, political unrest, working from home, the economy, etc.), people are throwing up their hands and saying – I’m so over this drama! I’m going to retire today!

Before you do, you should assess your circumstances so that you understand IF you are ready to retire. In this regard, you need to balance your assets (i.e., your income stream during retirement) against your projected living expenses. Montgomery Taylor Wealth Management’s retirement plan advisors can guide you through this assessment and help you get to where you want to be if you’re not there just yet.


Important Questions to Ask

Part of assessing your readiness to retire is asking yourself some pointed questions about your projected finances and lifestyle once you’re no longer working. The following are some questions for you to consider.


1. How much income will I need when I retire? 

There are some popular formulas for determining your required post-retirement income, but they are imprecise and impersonal. One old chestnut is the 4% Rule, which states you should spend 4% of your retirement savings each year. Theoretically, this tactic would stretch your nest egg to last 25 years. If you plan to live longer, you might cut the annual draw to 3%.

The problem with one-size-fits-all formulas such as the 4% Rule is that they don’t account for your unique circumstances. Only a proper financial plan can give you an informed estimate of the retirement income you’ll need. The plan should consider retirement savings, income, investments, tax planning, health costs, living arrangements, estate planning, and charitable giving. 

As a Registered Investment Advisor (RIA), Montgomery Taylor Wealth Management has a fiduciary duty to act in your best interest, including working with you to develop a custom retirement plan that will help you make critical decisions.


2. Do I need to revise my Investments to provide a suitable income stream?

Quite possibly. It depends on the assumptions in your financial plans and how well your investments will meet your needs. Your portfolio must balance risk and return. 

The time-honored way is to allocate your money across a diversity of investments (from simple to sophisticated) that produce the income you need while protecting you against inflation. In addition, your portfolio should be tax-efficient to retain as much of your money as possible.

Most of all, retirement plans require a high level of risk control. We’ll work with you to make sure it’s invested appropriately based on the current market cycle and your investment objectives.

Click here to take our Risk Questionnaire to find out in 5 minutes what risk number best suits you. We use this tool to compare your risk comfort level with your current portfolio and to help suggest the right allocation for you going forward.


3. What is the impact of my retirement age on my Social Security income?

You can claim your Social Security benefits any time between the ages of 62 and 70. Each year you postpone your claim increases the benefit you’ll receive. For example, if you wait until you reach full retirement age (say, at age 66), you’ll receive your total primary insurance amount (PIA), as determined by your earnings record. If you wait another four years, your benefit will grow 8% per year until age 70.

If you are married, you may claim spousal benefits based on your spouse’s work record while postponing your personal benefit. You can receive 32.5% to 50% of your spouse’s PIA when you claim spousal benefits, depending on your age. You can claim spousal benefits through a restricted application even if your spouse has yet to claim their personal benefit.

Restricted applications are available if either spouse was born before January 1, 1954, and you have reached full retirement age (somewhere between 66 and 67, depending on your birth date). Your restricted application doesn’t impact your or your spouse’s personal Social Security benefits when you later file your claim based on your own work record.

We can help you coordinate your Social Security benefits with your other retirement income sources to control their impact on your taxes. We specialize in retirement and estate planning in Sonoma County.


4. How will I sustain my desired lifestyle?

It’s easy to worry about achieving the retirement lifestyle you desire. But several factors should provide some optimism:

  • Many retirees require less income than they think. Your spending habits may shift over time as your interests evolve. You will no longer have work-related costs, such as commuting, continuing education, work wardrobe, professional insurance, travel to conferences, unreimbursed expenses, etc. Once you retire, you no longer need to save for retirement, saving you thousands each year in 401K and IRA contributions.
  • You can adapt to changes in your income level. Many retirees choose to relocate and/or downsize. Retirement may also be a good time to liquidate assets you no longer use, such as a vacation home or a boat. A well-planned retirement enables you to simplify your life without necessarily compromising the most important elements of your lifestyle.
  • You will probably be in a lower tax bracket, stretching your income from traditional retirement accounts.
  • You can look for ways to earn money. Many retirees enjoy working as consultants and freelancers. You may want to convert a hobby into a business.


5. How can I avoid outliving my savings?

Miniature alarm clock with stack of coin under gold sun light.Saving money.Financial report.Time is money and wealth.Passive income concept. You have several practical ways to avoid outliving your money, including:

  • Continue to earn money using your lifetime of accumulated skills.
  • Eliminate unnecessary spending. Adopting and sticking to a budget is enormously helpful in this regard. 
  • Increase your pre-retirement savings so that it takes longer to deplete your nest egg.
  • Consider long-term care (LTC) insurance to cushion the costs you might encounter as your age.
  • Delay your Social Security claim, as discussed earlier.


6. How do I take care of my family after I’m gone? 

You need a will and an estate plan to ensure your family’s welfare after you die. Creative use of life insurance, including using it to fund trusts, can help provide your family with crucial assets once you’re gone. Also, check out Social Security survivor benefits for your spouse and children. We can help you develop an estate plan that supports your legacy.

Look to Montgomery Taylor Wealth Management for Advice You Can Trust

At Montgomery Taylor Wealth Management, we specialize in complete, comprehensive financial and retirement planning. We integrate the various components of your finances to gain efficiency, improve tax sensitivity, reduce fees, and minimize missed opportunities. Our approach truly allows us to work in your best interest, and our fiduciary responsibility requires it.


Call us today @ (707) 576-8700 for a free, no-obligation Retirement Consultation. 


Click here to see a short video “Is it Possible to Retire Early?”