Retirement Planning & Investing

When Can I Retire? Do I have enough assets to retire?

When you can retire is greatly influenced by figures such as:

• how much money you have accumulated at retirement
• how much you would spend during your retirement
• what your investment would earn
• what the inflation rates are during your retirement
• how long you and your spouse would live

We also have to consider the implication of the future taxes as well. That requires us to not only create a financial plan but also monitor your plan to see whether you are staying in course during your and your spouse’s life time.

For some clients, the retirement age (when they want to retire) is fixed and non-negotiable. For others, the age is not fixed but rather is a certain number in their mind. How much money they would spend during retirement in today’s dollar is fixed and non-negotiable. With our retirement planning and investing services, we will run a few scenarios to see how your retirement looks under those scenarios and whether you can maintain the desired lifestyle throughout your life.

How Will I Fund My Living Expenses in Retirement?

Based on the assets you have accumulated; we will figure out how to best deploy those assets to start receiving income.

First, we will collect all the assets that you have accumulated and examine the type of assets. For you to have lower tax, we keep from taking out money from your retirement assets such as 401(k), Traditional IRAs, 403(b), Qualified IRA annuities until you are required to take Required Minimum Distribution which is 72 years old under the current tax law.

That means that you need to take your living expenses from other assets first until you reach to 72 years old. At Fujiyama Wealth Management, our time tested retirement planning and investing strategies will lay out clearly how much money you are taking from each asset you have.

For example, let’s make a scenario that you retire at 67 and need $10,000 per month in living expenses. You and your spouse have $1.5MM in taxable stocks and fixed income portfolios, $300,000 in an annuity account which you can take out 5% of the value for the rest of your and your spouse’s lives, and $1.5MM (you $1.0MM and your spouse $0.5MM) in retirement accounts. Your spouse is 63, still working, and earning $3,000 per month after all the deductions until age 65. You have a rental beach home which is paid in full and the average net income from the rental property is $1,000 per month. You can start withdrawing $1,500 per month until the end of the second life (you or your spouse).

It’s important to plan now and begin saving more systematically while thinking about reducing expenses. Delayed gratification every month from $1.5MM that we manage for you. This $4,500 per month withdrawal from your taxable account changes when your spouse retires and when you and your spouse start taking Social Security Retirement Income. We will show you exactly how much and when the money comes from which assets.

In addition when you and your spouse turns 72, we start taking Required Minimum Distribution (RMD) from both of your retirement accounts.

Your living expenses go up every year and tax law may change in the future. We will incorporate these and other factors in your plan. Also, some clients want $10,000 per month before the consideration of paying income tax and other clients include tax payments within the $10,000 per month needs. We calculate your need depending on your plan.

When and How Should I Start Taking Social Security?

We will run Social Security Maximum Income Strategy and show you your current plan of taking Social Security Income and Maximum Social Security Income. We will show you the life-time difference in amount you will receive if you go with your plan and if you follow our strategy. We listen to your needs, life expectancy, and your unique situation and we will determine what the best strategy would be for you.

The earliest age that you can start taking Social Security Retirement Income is 62, and the latest age to take this is 70. On the Social Security Statement from ssa.gov, you see three estimated Social Security Retirement Income amounts; when you are age 62, when you are Full Retirement Age (FRA), and when you are age 70. You can start taking income from age 62 but the amount that you receive is reduced from the amount if you take at FRA or age 70. Also, once you start taking Social Security Retirement Income and later try to change it to later date, there is a complicated and cumbersome process you can take. For more, see: AARP social security questions answered >

In many cases, it is better to wait to take it until age 70. However, you may want or need to take it out earlier due to your health situation and circumstances you are in. Our retirement planning and investing services will guide you through various aspects so that you can make the best decisions for yourself.

What is My Plan for Health Insurance? When Should I Apply for Medicare?

If you’re eligible for Medicare when you turn 65, you can sign up during the 7-month period that: Begins 3 months before the month you turn 65. Includes the month you turn 65. Ends 3 months after the month you turn 65. Medicare helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care.

Medicare Part A (hospital insurance) helps pay for inpatient care in a hospital or limited time at a skilled nursing facility (following a hospital stay). Part A also pays for some home health care and hospice care. Most people age 65 or older are eligible for free Medical hospital insurance (Part A) if they have worked and paid Medicare taxes long enough.

Medicare Part B (medical insurance) helps pay for services from doctors and other health care providers, outpatient care, home health care, durable medical equipment, and some preventive. There is a monthly premium for Part B. Some beneficiaries with higher incomes will pay a higher monthly Part B premium.

To supplement for the uncovered portion, you can buy Medicare Supplement Insurance or Medical Advantage policy from a private insurance company. Supplemental (Medigap) policies help pay Medicare out-of-pocket copayment, coinsurance, and deductible expenses. Medicare Advantage Plan (previously known as Part C) includes all benefits and services covered under Part A and Part B — prescription drugs and additional benefits such as vision, hearing, and dental — bundled together in one plan. Medicare Part D (Medicare prescription drug coverage) helps cover the cost of prescription drugs.

One thing to point out here is that people who are still working at 65 try to keep their company’s health insurance policy. The laws that prohibit large insurers from requiring (or even persuading) Medicare-eligible employees to drop the employer plan and sign up for Medicare do not apply to companies and organizations that employ fewer than 20 people. In this situation, the employer decides.

If the employer does require you to enroll in Medicare, then Medicare automatically becomes primary and the employer plan provides secondary coverage. In other words, Medicare settles your medical bills first, and the group plan only pays for services that it covers but Medicare doesn’t. Therefore, if you fail to sign up for Medicare when required, you will essentially be left with no coverage.

We encourage you to work with Medicare specialist and recommend you one if you need help on this important subject.

Additional questions & concepts we will explore in your Retirement Planning and Investment Strategy:

How to Maximize Social Security Income for Myself & My Spouse?

How to Reduce Annual Medicare Premiums?

Medicare Advantage vs Medigap Coverage? Which One Should I Select?

How to Create a Lifetime Income So That I Don’t Outlive My Assets?

What Do I Need to Know About Required Minimum Distributions (RMD) and When Should I Start Taking Them?

How Should I Allocate My Investment Portfolio During Retirement?