Alex Call, CFP®, Author at Peterson Wealth

Smarter Retirement Decisions: Your Common Questions Answered

Posted on December 30, 2025December 30, 2025 by Alex Call, CFP®

Retirement decisions often revolve around the same key pillars: tax-smart giving, withdrawal timing, Social Security, education funding, and how accounts work together. The goal is steady cash flow, reasonable taxes, and flexibility as life evolves.

We recently had a Q&A session and these were the most pressing questions from the people we meet with. If you have any pressing questions you’d like to get answers to please contact us.

Remember – good choices start with clear guardrails. Knowing limits, start ages, and trade-offs helps you sequence moves and avoid surprises, especially as rules shift over decades.

1) What Do I Need to Know About Charitable Contribution Limits, Percentages, and Carryforwards?

Charitable giving is common in retirement, but the deduction rules vary depending on what you give and where it goes. Here are the essentials to compare before you buy gifts or choose a vehicle:

Cash gifts to public charities: You can generally deduct up to 60% of adjusted gross income when donating cash to a qualified public charity (e.g., a church or recognized nonprofit). This higher cap can make same-year “bunching” a helpful way to itemize when it improves your overall tax picture.

Gifts of appreciated assets: Donating long-term appreciated stock or other assets directly to a qualified charity generally allows a deduction up to 30% of AGI, and the built-in gain isn’t taxed. This can trim concentrated positions while turning unrealized gains into a deduction.

Excess contributions: If gifts exceed the annual limit, the unused portion can typically be carried forward for up to five years, which is helpful in higher-income years or when you expect to itemize again.

Vehicle nuances: Donor-advised funds and private foundations have different percentage limits and operating rules. Match the vehicle to your goals (simplicity, control, or legacy) before making larger, multi-year commitments as part of your financial planning.

2) When Do Required Minimum Distributions (RMDs) Start, and How Are They Calculated?

RMD timing depends on your birth year, and the required percentage rises as you age. Because the calculation uses last year’s balance and an IRS life-expectancy factor, planning helps avoid rushed withdrawals and penalties:

Start ages: If you were born before 1960, RMDs begin at age 73; if born in 1960 or later, they start at age 75. Build these dates into your retirement planning well in advance of the first deadline.

How the amount is set: The IRS applies a life-expectancy factor to your December 31 balance, which produces an effective percentage that starts around 4–5% and steps up gradually over time.

What it means practically: Even at age 80, the required amount is often still under 10%, so balances are usually drawn down over decades, not a short window. An IRS calculator can help you estimate the figure and calculate taxes.

3) How Should I Compare Medigap, Medicare Advantage (Part C), and Part D Drug Plans?

Choosing among Medigap, Advantage, and Part D is easier with a side-by-side view of coverage and total-year costs. Start with your expected care needs and medications, then compare:

Medigap vs. Part C (Advantage): Medigap pairs with Original Medicare to reduce out-of-pocket expenses and maintain broad provider access; Advantage bundles coverage with networks, prior authorization rules, and additional benefits (such as dental/vision/fitness). Its flexibility and predictability vs. managed care, with potentially lower premiums.

Part D prescriptions: Formularies, tiers, and preferred pharmacies drive real-world spending. Run your exact medication list through each plan to identify tier jumps, quantity limits, and prior authorization requirements before enrolling.

Switching risk and lock-ins: Advantage plans are easy to enter, but may be difficult to leave if you later want Medigap; medical underwriting can block or price you out outside of guaranteed-issue windows. Consider weighing today’s premium savings against the option value of keeping Medigap available later, especially if your health needs could rise.

4) Can I Create a Tax-Deductible Scholarship or Deduct College Support for My Grandchildren?

Many families hope for a tax-deductible way to fund a grandchild’s college, but there isn’t a direct federal income-tax deduction for that purpose. The tax code channels most education support through vehicles like 529 plans rather than broad charitable deductions.

Private foundations can award scholarships, but they come with governance, oversight, and nondiscrimination rules, and you generally can’t earmark grants for family members. For most households, the complexity and cost outweigh the benefit.

There are narrow, faith-based cases, such as deductible contributions for future missions, that don’t translate to tuition support for grandchildren. Understanding these boundaries sets expectations and points you toward workable alternatives, such as 529s.

5) How Do 529 Plans Actually Work, and What State Nuances Should I Watch?

Contributions to 529s are made with after-tax dollars at the federal level (no federal deduction); the money grows tax-free, and qualified withdrawals are tax-free. These simple mechanics reward early, steady saving.

Each state sponsors its own plan, which varies in terms of fees, investment options, and potential state-level benefits. Some states offer a deduction or credit for in-state contributions (ex., Utah offers a small state deduction). Reviewing costs, options, and any home-state benefits helps you choose the right fit.

Because growth is tax-free when used for qualified expenses, time in the market is the primary driver. Treat the account as part of your investment portfolio and automate contributions to maintain steady progress.

6) What’s the Most Tax-Efficient Way to Donate from an Investment Account—Appreciated Stock or QCDs?

Giving can do double duty when you pair generosity with tax-smart mechanics. Before age 70½, appreciated securities usually win; after 70½, IRA-based giving often takes over. Because it’s not a silver bullet either way I’d recommend speaking with your tax advisor.

Here’s how to line it up with your tax strategies:

Appreciated stock gifts (before 70½): Donating long-term appreciated shares directly to a qualified charity avoids capital gains on the embedded growth and still provides a deduction (generally up to 30% of AGI). This is a brokerage-account play, not for IRAs/401(k)s, and it’s a clean way to trim concentrated positions.

Qualified Charitable Distributions (after 70½): Once eligible, a QCD lets you give straight from a traditional IRA; the amount is excluded from income and can satisfy part or all of future RMDs when they begin. For individuals over 70½ who are routine givers, QCDs are often the most tax-advantaged option.

Right account, right time: Consider using appreciated stock from taxable accounts before 70½; then switch to IRA-based QCDs after 70½. Align the tool with your giving rhythm and bracket targets.

7) When Should I Claim Social Security—Is Waiting Really Worth It?

If you don’t need the income and expect a long life, delaying is powerful: benefits increase by 8% per year until age 70. For a 68-year-old, waiting two more years means 16% higher payments for life, and it strengthens the survivor benefit a spouse would keep.

Rule-of-thumb break-even for starting at 70 versus full retirement age is roughly a decade (the exact point depends on inflation and spousal filing interactions). If cash flow is tight or health is a concern, earlier filing may be reasonable; otherwise, waiting usually pencils out.

8) Is Social Security Really at Risk, or Are Incremental Fixes More Likely?

Concerns about the program are common, but history points to adjustments at the edges rather than collapse. Past reforms have tweaked the full retirement age and formulas; future changes may affect COLAs, the wage base, or the ages for younger workers.

For those nearing retirement, planning as if benefits disappear is usually unnecessary. Build your timing decision around health outlook, longevity expectations, spousal coordination, and your broader retirement goals.

Keep perspective: your household plan (savings rate, investment strategies, withdrawal sequence) matters more to your outcome than headline risk. Use Social Security as one pillar among several, not the entire structure.

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9) Roth or Traditional—How Do I Balance for Tax Diversity Without Going to Extremes?

Balancing Roth and traditional dollars preserves flexibility as tax rules evolve. Two drivers matter most: your current bracket versus your expected bracket later, and how future giving or withdrawals will interact with each account type:

Bracket comparison: Paying tax now via Roth contributions or conversions helps most when today’s rate is clearly lower than what you expect in the future. Use projections to determine whether and how much to convert in a given year.

Avoiding all-Roth conversions: For many households everything can push income into top brackets today, only to find later withdrawals would have been taxed at lower rates. Maintaining a traditional balance can help temper near-term tax increases and preserve options.

QCD synergy: Qualified Charitable Distributions only work from traditional IRAs after age 70½. Preserving some pre-tax assets enables QCDs, while Roth dollars compound for future tax-free withdrawals.

Measured approach: Run periodic projections (coordinated with other income, deductions, and Medicare considerations) to “fill but not overfill” target brackets each year and keep tax strategies on track.

10) Should I Consolidate to One Account or Keep Several—Does the Label Even Matter?

Spreading the same portfolio across multiple accounts doesn’t change how compounding works. If each account holds the same mix, the results follow the allocation, not the title on the statement.

Account types (401(k), IRA, brokerage) are just containers with different tax rules. What actually drives outcomes is your asset allocation, costs, and how you rebalance over time.

Focus on the mix that fits your goals and risk tolerance, then keep fees in check and rebalancing disciplined. The accounts are secondary; the plan is the engine.

11) How Do I Build a Retirement Budget That Adapts Over Time?

Start with real numbers. Pull a year or two of spending to set a baseline, then adjust for lifestyle shifts. Consider, for example, increasing travel early on, so your estimates reflect how you actually live.

Inflation compounds quietly but meaningfully over decades. Even modest rates can erode purchasing power, so your plan should assume rising expenses and revisit them regularly.

Tie the budget to a structured income plan that flexes with markets and life events. That keeps withdrawals aligned with cash needs, helps maintain financial security, and avoids overreacting to short-term noise.

12) Are Target-Date Funds Diversified Enough for Retirement?

Target-date funds (TDFs) offer a simple, diversified core and automatically shift to a more conservative allocation as the target year approaches. For savers, depending on the fund, the one-fund structure can keep costs low and behavior disciplined:

Built-in diversification: Most TDFs are “funds of funds” that hold U.S. and international stocks and bonds, providing broad exposure without requiring extra maintenance. Treat them as a core rather than a complete investment strategy if you need custom tilts.

Glide path: Allocations shift gradually toward bonds as the target year approaches, aiming to reduce volatility as retirement nears. The automatic rebalancing keeps the mix aligned with the time horizon and helps maintain balance across market fluctuations.

Retirement use: In distribution years, some prefer separate conservative and growth buckets to manage withdrawals deliberately. Align the target year with your real timeline and planned spending pattern.

13) Should I Pay Down the Mortgage or Save More for Retirement?

It rarely needs to be all-or-nothing. A split approach, keeping investments while making extra principal payments, often balances compounding with the peace of mind that comes with entering retirement with lower fixed costs. Calibrate to your savings progress, horizon, and risk comfort.

Your mortgage rate matters. A low, fixed rate generally favors continued investing; a higher rate tilts toward faster payoff. Compare the after-tax cost of debt to expected after-fee, after-tax returns so your decision reflects real trade-offs.

Lifestyle counts, too. Many households value a lighter monthly burn, but not at the cost of underfunded retirement savings. Aim for a mix that keeps your plan on track while steadily shrinking the loan.

We Can Answer More of Your Retirement Questions

Thoughtful guardrails make complex choices simpler: give in tax-smart ways, map RMD timing in advance, and sequence withdrawals to avoid bracket creep. Small, well-timed shifts often matter more than sweeping changes.

If questions arise as you review these moves, or if you would like side-by-side scenarios, please reach out. Clarifying the order and size of a few steps can make retirement planning feel far more manageable as your future unfolds. Please schedule a complimentary consultation call with our team today.

The Real Benefits of Long-Term Investments: Why Patience Pays Off

Posted on September 10, 2025September 10, 2025 by Alex Call, CFP®

Sticking with a long-term investment strategy not only takes financial knowledge—it also takes emotional strength. You must believe that your money will work for you, even when the headlines are loud, the markets are noisy, and your confidence feels shaken. The challenge isn’t just understanding how investing works—it’s committing to a way of thinking that keeps you steady during the highs and the lows.

Long-term investors succeed because they learn to hold two truths at once: faith that the future holds opportunity, and discipline to stay the course even when today feels uncertain. This isn’t blind hope. It’s clarity about your values, goals, and the historical patterns that reward patience. Investors who thrive don’t react to every market twist. They lean into a mindset that favors conviction over reaction, and resilience over impulse.

Three Hard Truths Every Investor Must Accept

Contrary to popular belief, long-term investing isn’t about perfect timing of flawless predictions; it’s about recognizing what you can control and learning to live with what you can’t. Many investors come into the process thinking they’ll find a path free of stress, losses, or surprises. However, that’s not how wealth builds over time. To invest for the long haul, you need to accept a few uncomfortable truths upfront:

1) There’s always a crisis: Somewhere in the world, something unsettling is always happening—wars, elections, trade battles, economic downturns, or new headlines meant to grab your attention. If you’re waiting for a perfect moment of calm before investing, you’ll wait forever. Markets don’t reward perfection—they reward participation. Missing out while waiting for stability is often one of the costliest choices you can make.

2) Volatility is a feature, not a flaw: Market ups and downs aren’t glitches in the system—they are the system. Big drops, even of 10%, 15%, or more, show up regularly. That unpredictability isn’t a sign something is broken. It’s a part of how returns get earned over time. Long-term investors expect this. They don’t get scared out of the market when it happens—they plan for it in advance.

3) You won’t see it coming: Trying to guess when the market will rise or fall is a losing game. The turning points never announce themselves. Economic slumps don’t wait for you to shift your strategy. When things “feel safe,” the market has often already moved. Predicting the right moment to act is more guesswork than science, and it rarely works twice.

Please Note: You don’t need to forecast every surprise in the market. You just need to stay in. The people who consistently build wealth aren’t the ones with the best predictions—they’re the ones who accept uncertainty and stick with their plan. Staying invested through the noise often beats even the most sophisticated attempts at jumping in and out.

Volatility Doesn’t Derail Long-Term Growth

When the market dips sharply, it’s natural to feel alarmed. However, history tells a different story than our instincts. Sharp declines might dominate news cycles, but time has healed the market every time. More often than not, the market rebounds—sometimes quicker than anyone expects.
Here are some examples to keep in mind:

1987 – Black Monday’s Stunning Collapse and Fast Rebound: On October 19, 1987, the Dow Jones Industrial Average plunged 22.6% in a single day—still the steepest one-day percentage drop of all time. Panic spread fast, and many braced for an economic freefall reminiscent of the Great Depression. But what happened next surprised most observers: despite the sharp hit, the market began recovering within days, and in under two years had reached new highs.1

2000–2002 – The Dot-Com Collapse and Long Climb Back: The early 2000s saw tech stocks soar to stratospheric valuations on the back of internet hype. But when the bubble burst, the Nasdaq Composite fell more than 75% from its peak. Companies with shaky business models vanished overnight, and it became clear how much irrational exuberance had inflated the sector. Recovery wasn’t quick—tech investors waited 15 years before seeing the Nasdaq hit new all-time highs.2 Still, this long cycle was a reminder that even the most dramatic corrections eventually settle and rebuild.

2008–2009 – The Great Recession and the Slow, Steady Return: When the housing market collapsed and the financial system teetered on the edge, the S&P 500 lost over 50% of its value. Banks failed, consumer confidence disappeared, and the global economy felt deeply unstable. The damage was severe, and it took years of policy support and gradual economic repair for confidence to return. But by March 2013, the market had not only recovered it started setting all-time high records again.3

2020 – The COVID Crash and One of the Fastest Recoveries on Record: As the pandemic spread across the globe in early 2020, the market fell hard and fast. The S&P 500 dropped about 34% in just 33 days, marking one of the most abrupt declines in modern history. Fears of a deep and extended recession loomed. Yet within months, the market had bounced back. By August—just five months after the low—major indices had regained all of their losses.4 This example provides a stark (and recent) reminder of how quickly things can turn around, even in the face of a once-in-a-century crisis.

Please Note: It’s typical for the S&P 500 to experience a decline of about 14% from its high point during the middle of the year. Yet even with those temporary drops, the index finishes in positive territory nearly 75% of the time.5 Noticeable market drops (and full recoveries) are common every year, not just in the extreme examples like the ones above. The point is, if you’re aiming for long-term growth, short-term setbacks aren’t just possible—they’re part of the deal.

Time Flattens Risk and Boosts Your Odds

The longer you stay invested, the better your odds of a positive outcome. Markets may be unpredictable day to day, but over a long enough period of time, the positive patterns become much clearer:

Short-term vs long-term probabilities: If you’re only invested for a day, your odds of a gain are just slightly better than a coin toss (54%).6 Stretch that out to one year, and your odds improve significantly (70%).7 Hold for 5 years, and your chances of a positive result climb even higher, and once you hit 10 years, things become virtually certain. Studies have shown that over the past 82 years, any investment in the S&P 500 held for 10 years had a 100% chance of a positive return.8

Return ranges narrow over time: The swings in performance also shrink the longer you hold. Over one year, you might see returns as high as 50% or as low as -40%. But look at a 30-year timeframe, and those extremes compress, ranging from substantial gains to modest ones.

Even bad timing can pay off: Investors who entered the market just before major crashes—like the 2000 dot-com bust or the 2008 financial crisis—still came out ahead if they held on. Buying at a peak isn’t ideal, but staying invested gives their money time to recover and grow. The real damage usually happens not from buying high, but from selling in panic.

Compounding Turns Time Into a Tool: Growth in the market doesn’t just stack—it snowballs. The power of compounding means your gains generate their own gains, creating momentum that builds over the years. That’s why investors who avoid constant tinkering and let their investments ride often outperform. The key isn’t constant activity—it’s letting time and math work in your favor.

Please Note: Markets have weathered every kind of disruption—from inflation spikes to wars, recessions, and global pandemics—and still moved forward. That’s why your long-term goals deserve a strategy that looks well beyond short-term headlines and temporary noise.

The Cost of Trying to Time the Market

Trying to time the market is always tempting. (If you could just sell right before the drop. If you could just buy right before the rebound.) Just remember, this is a fantasy. In reality, most who try to time the market end up chasing moves after they’ve already happened, and the cost can be steep.

You often miss the bounce back when you exit the market in fear. The best days—those surprising, high-return recoveries—can show up right after the worst ones. They can also be clustered together, making it nearly impossible to skip the bad without missing the good.

For example, between 2004 and 2023, seven of the 10 best days came right on the heels of the worst ones. Had you stayed put, the S&P 500 delivered an average return of 9.8% per year. But miss the 10 best days, and that drops to 5.6%. Miss 20? You’re looking at just 2.3%. And if you happened to miss the 30 best days altogether, your return would have been nearly flat at just 0.1% per year.9

This is why so many long-term strategies beat the market timers. When you stay invested, your performance reflects the full arc of the market. When you jump in and out, you make investment decisions based on emotion, not evidence—and often at the worst moments.

Tune Out the Noise—Focus on What Matters

It’s harder than ever to hold your attention steady. Every screen screams for it—news alerts, political outrage, and social media sentiment. But successful investors don’t chase headlines. They train themselves to tell the difference between what’s loud and what’s lasting. Here’s how that mindset plays out in practice:

Politics create drama, not direction: Elections, legislation, and party shifts may rattle markets temporarily, but they rarely alter the long-term trajectory. In fact, the stock market has delivered positive results under every political combination (Democratic presidents with Republican Congresses, Republican presidents with Democratic Congresses, and every mix in between.) Policies may influence certain sectors in the short term, but the broader economy and market returns are shaped by innovation, productivity, demographics, and global trends—none of which reset every four years.

The media isn’t your portfolio manager: Keep in mind that headlines are written to provoke clicks—not to help you make sound financial decisions. The media thrives on crisis language because it captures attention. But “stocks drop 2% on economic data” becomes “Market in Freefall” by the time it hits your feed. This kind of sensationalism can create an emotional whiplash that pulls you away from your plan. Smart investors know the real investment story unfolds slowly—over quarters, years, and decades.

Public sentiment swings—but value builds quietly: Consumer confidence surveys, investor sentiment polls, and market mood indexes often reflect how people feel, not what companies are actually doing. Feelings can shift with headlines, elections, or even celebrity tweets. But companies continue to innovate, make earnings, enter emerging markets, and provide returns to shareholders. Investment value accrues beneath the surface, even when the mood is sour.

Short-term volatility blinds you to long-term compounding: Zoom in, and the market looks erratic—spikes and crashes, red days and green days. But zoom out, and the signal is clearer: over time, the market has steadily moved higher. That upward drift reflects human progress—more people working, more companies growing, and more capital being put to productive use. Obsessing over short-term moves only amplifies anxiety and encourages poor timing.

The best investors are patient listeners—not impulsive actors: As Warren Buffett put it: “If you mix politics with your investment decisions, you’re making a big mistake.” The most successful investors aren’t glued to CNBC or predicting the next Fed move. They’re filtering for what matters: company fundamentals, portfolio allocation, long-term risk tolerance, while letting the rest fade into background noise.

Please Note: There’s no shame in taking a step back. The headlines are built to stir emotion—and they get to all of us sometimes. That’s why working with a financial advisor can be so valuable. Think of them like a coach: they help you stay calm, focused, and committed to your long game, especially when the noise gets loud. You don’t have to tune out the noise alone. Let someone whose job is to monitor the markets help you keep perspective, so you can focus on what really matters—your plan, your progress, and your peace of mind.

FAQs: Long-Term Investing and Market Volatility

1. Is it normal for my portfolio to drop 10% or more?

Yes— in fact, it’s actually quite common. Studies examining a 20-year period have shown that the S&P 500 dropped by at least 10% in roughly half of those years.10 These drops can be scary, especially if you’re checking your accounts frequently, but they’re just a normal part of the market’s cycle.

A dip of this size doesn’t automatically mean something’s wrong with your portfolio or the broader economy. Investors who stay focused on their plan understand that temporary losses are often just that—temporary. Over time, those brief setbacks tend to be overshadowed by the long-term trend of growth.

2. Has the market ever been down over a 20-year period?

When you look at history, there hasn’t been a single 20-year stretch where the S&P 500 delivered a negative return.11 That includes some of the most challenging economic events in modern history: the Great Depression, World War II, stagflation in the 1970s, the dot-com collapse, and the 2008 financial crisis.

3. When’s the right time to get out of the market?

That’s the trick—there usually isn’t one. It’s tempting to think you can jump out when things feel shaky and then jump back in once the dust settles. But the market doesn’t work that way. Many of the biggest up days happen right after the worst ones.

If you’re on the sidelines when those rebounds hit, your long-term performance can take a serious hit. By staying invested through the uncertainty, you don’t need to predict the exact moment of recovery—you’re already in position to benefit when it happens.

4. What if I invest right before a crash?

Investing right before a market dip is a common fear—and it’s not unfounded. The idea of watching your portfolio shrink soon after putting money in can be unnerving. But history shows that time, not timing, does the heavy lifting. Even after sharp declines, markets have typically rebounded within a few years, rewarding those who stayed invested.

The real risk isn’t buying at the wrong moment—it’s abandoning your plan when things look bleak. Long-term gains come not from dodging every downturn, but from sticking with a strategy built for the long haul. Even poorly timed investments, when held over decades, have often delivered meaningful growth.

Please Note: That said, not all investors are starting from the same place. If you’re in or near retirement, the timing of market drops can matter more. This is called sequence of returns risk—the risk that a major market decline early in your withdrawal years can reduce the long-term sustainability of your portfolio, even if average returns are solid over time. It’s a legitimate concern, and it’s one we help our clients plan around. From cash reserves and withdrawal strategies to asset allocation adjustments, we build portfolios that consider both the upside of staying invested and the real-life need to protect against poor timing during retirement years.

5. Do elections or political changes impact long-term returns?

Politics can stir up plenty of market noise and volatility in a given moment. But when you zoom out, the data again tells a more consistent story. The stock market has delivered strong returns under both Republican and Democratic administrations.

No single party owns positive market performance. Rather than letting election cycles guide your investment strategy, it’s more productive to focus on your long-term goals, your personal timeline, and the fundamentals of diversified investing.

We Can Help You Secure Long-Term Investing Wins

Success in long-term investing isn’t about calling the market’s next move. You should build a plan you can actually stick with. That means recognizing that your behavior, particularly how you respond during tough times, matters more than any prediction or forecast. You don’t need to be perfect. You simply need to be consistent. Discipline creates the space for compounding to do its work—quietly, powerfully, and over time.

But it’s not just discipline that matters; it’s belief that it will work out. Not blind optimism, but confidence grounded in history. A sense that—even with setbacks—the world keeps moving forward. That companies adapt. That people keep building. That progress, while uneven, is real. Holding that belief is what allows you to invest for the long term.

If this long-term approach resonates with you, you don’t have to figure it out on your own. You can work with one of our financial advisors who understands your personal values and retirement goals. We invite you to schedule a complimentary consultation call with our team today.

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Four Questions Your Retirement Plan Should Answer

Posted on April 3, 2022August 21, 2025 by Alex Call, CFP®

Creating a retirement plan can be a daunting task. At Peterson Wealth Advisors, we use our propriety process, the Perennial Income Model™, which outlines three ‘building blocks’ to a retirement plan. Whether you use the Perennial Income Model or another type of retirement plan, these building blocks will make sure you are on the right track to a successful retirement.

The three building blocks to a retirement plan are income and investments, taxes, and legacy. If your plan is built on these three blocks you should have the necessary information to answer the following crucial retirement planning questions.

4 Questions your Retirement Plan Should Answer

1. Do I have enough money to satisfy my income needs in retirement?

2. How do I invest my money to ensure this income lasts throughout retirement?

3. What can I do to protect my income from taxes?

4. How can I make sure my money goes to who I want it to go to when I want it to go to them?

If your retirement plan doesn’t give you the necessary information to answer those four questions, then it’s a poor plan and you should find something better. If it does, then you’re on the right track.

3 Building Blocks to a Retirement Plan

Block 1: Income and Investments

The income and investment block is the foundation to a retirement plan. Income and investments go hand in hand because how much income you can expect to have in retirement is determined in large part on how you invest your money.

The income portion of the block is where your different sources of retirement income – investments, social security, pensions, rentals, etc. – are gathered to create a consistent single stream of income throughout your retirement. To maximize your income, you must look at each source in the context of your entire plan, not in a vacuum. For example, the goal is not to maximize your Social Security income, but the goal is to maximize your retirement income.

The investment portion of the block determines how to invest your money while balancing risk and return. The money you need to live off in the early years of retirement needs to be invested conservatively to limit volatility, where the money you don’t need for decades needs to be invested aggressively to keep pace with inflation.

The Perennial Income Model achieves both these objectives, letting you know how much income you can expect to have in retirement and how to invest your money to ensure your income lasts throughout retirement. It’s up to you to determine if this amount of income will satisfy your income needs in retirement.

Block 2: Taxes

The goal of tax planning is to pay the least amount of income tax, not just in the first year of retirement but throughout all of retirement. Knowing what your income will be over the next 30 years allows you to build a long-term tax plan. This is exactly what the Perennial Income Model does, allowing you to build an efficient tax plan throughout your retirement.

The different tax strategies that can be used are beyond the scope of this post, you can learn more about them here, but they include using tax-efficient investment funds, minimizing Required Minimum Distributions, utilizing Roth conversion, and charitable giving strategies.

Block 3: Legacy

Once your income is secure throughout retirement you move on to the Legacy building block.

The goal of the Legacy building block is to effectively and efficiently transfer your assets to who you want them to go to when you die.

Knowing how much you will have at the end of your retirement plan gives you the insight needed to make those decisions and to know if you should be concerned about estate taxes. People typically fall into one of three groups:

Simple: This group wants their money split evenly between their heirs when they die, and their estate isn’t large enough to be affected by estate taxes (an individual’s estate needs to be over $12.06 million, in 2022, before estate taxes affect it).
Minor Complexity: This group wants more control, outlining when the money goes to their heirs and what they can use it for, and their estate still isn’t large enough to be affected by estate taxes.
Complex: This group has a large enough estate where estate taxes will be a concern – they need to not only think about who will receive their money and when they will receive it, but also how they will avoid paying estate tax on their money.

The different estate tax strategies that can be used are more than can be covered here but they include creating a gifting plan, knowing which accounts should be donated to charity, and moving money out of your estate to avoid estate taxes.

The Perennial Income Model lets you know how much you will have at the end of your plan, giving you the necessary insight into how much you’d like your heirs to have and when they receive their money. It also allows you to know if you need an estate tax plan.

Will Your Retirement Plan Succeed?

When presented with a retirement plan, whether it be by Peterson Wealth Advisors or someone else, you need to first ask yourself “will the income from this plan be enough for my retirement needs?” If the answer is yes, then ask your advisor these three crucial follow-up questions to make sure your retirement plan will succeed:

How do I invest my money to ensure this income lasts throughout retirement?
What can I do to protect my income from taxes?
How can I make sure my money goes to who I want it to go to when I want it to go to them?

The Perennial Income Model is based upon the three building blocks of a retirement plan – income and investments, taxes, and legacy – giving you the necessary information to answer these retirement questions.

Ready to discuss your retirement plan? Schedule a complimentary consultation.