When Should I Retire?

Few decisions in your life are as complex and fraught with significant consequences as the decision on when to retire. For most of us, this decision will affect more than just ourselves. Your decision cannot be made in a vacuum if you have a significant other, spouse, or others that depend on your paycheck. Many will consider issues such as the size of their retirement and investment portfolios, age, physical health, and the state of the economy. Still, others look to stagnation and boredom with their careers, the availability of a pension or social security, or even an inheritance.

Many books have been written about retirement and there is a wide spectrum of opinion on when people should retire, especially given that people are generally living longer. It was not so long ago that people rarely lived into their 70’s. Today, it is common for people to live to their 90’s or beyond. The fact that our lifespans are increasing with advances in medicine and technology begs the question: should we retire at all?

A very large segment of the country retires at age 62, which coincidentally is the earliest age you can qualify for social security retirement benefits. However, for the eager beavers who decide to do so, they should know that those benefits could potentially be permanently reduced by about 25 percent. For someone who might be around until age 92, that’s a lot of income to forgo. It is possible you may spend three decades in retirement. What the heck are you going to do with yourself for all those years? Visit the grand-kids, play golf, or work in the garden?

Before you even consider the idea of when to retire, engage the services of a financial and retirement income advisor team. Ideally, you will want to work with individuals who have decades of experience working with people similar to you. You will want to look for someone who is not close to retiring themselves.  Imagine how hard it could be to find someone you can trust 10 years from now when your advisor retires.  That is the last thing you will want to do while enjoying your Golden Years.

With all this said, remember that the decision as to when to retire does not just affect you. Your loved ones deserve to be part of the conversation and the decision-making process. Make sure your planning takes into account the financial aspect of retirement and also the life and living parts. You may have bid your spouse goodbye five days a week at 8:00 am for decades. But when that stops, things will change. That change may be for the better or worse, and you need to plan for that, too.


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Lessons From Multi-Millionaires

I read lots of articles, listen to several interviews, consume many, many books a year and a theme I have noticed from those who are financially successful is that change is necessary.  The way many describe the process is that there are four ways to change anything in your life:

  1. You can start doing something you are not currently doing.
  2. You can stop doing something you are currently doing.
  3. You can do more of something.
  4. You can do less of something.

Many of the topics I hear and read about include goal setting and planning, personal and business development, the power of focus and clarity, as well as the many keys to leading a successful life. I would like you to consider four keys to change as it relates to your own goal of preparing for a financially successful and secure retirement.

You can start doing something you are not currently doing.

Have you made an IRA contribution for the year? Are you a participant in an employer-sponsored retirement program?

If you are a business owner, have you established a retirement program for yourself and your employees?

Have you met with a financial professional to map out a strategy for retirement savings, or are you just winging it?

In other words, are you being proactive in securing your future or waiting for Bernie, Hillary, or Donald to come to your rescue?

You can stop doing something you are currently doing.

Are you ready to stop procrastinating and begin developing a plan for the day your paycheck stops?

Are you ready to stop trading stocks because you realize you are not a Wall Street trading genius?

Will you finally admit that you do not possess the skill set to design a retirement income plan that can see you through a potential three-decade retirement with your expenses rising 2% to 4% each year?

Are you ready to take your head out of the sand and ask for help? We have one shot in life to make it a good one. Will you risk it on your ego and the fact that you know everything and don’t need help?

You can do more of something.

You can save more for your retirement. Studies show that saving 10% to 15% of your income will work wonders over a career length savings program. Are you placing one half of bonuses and tax refunds in your own financial fortress to super charge your savings program? Are you teaching your family the importance of savings? Your children are very keen observers of watching what you do, in addition to listening what you say.

You can do less of something.

You can spend less. You can decide to forgo the $3.85 cup of coffee. You can decide that a used car is a smart economic substitute for a new car. You can stop purchasing things you do not need and instead place the funds in retirement and investment accounts to grow for the future. Remember, there are always a limited amount of resources and you must make intelligent decisions on how you will allocate the resources you have. Make good decisions and your chances of a better outcome will increase. Make poor decisions and you will find yourself hoping that public assistance programs pay more because you can’t live on the small amount they provide.

Put these millionaires keys to practice in your own life and imagine the possibilities for change

As always, if you need any help I am just a phone call or email away.

#1907442 / DOFU 9-2017

Retirement Income Strategy – Case Study

The case study you will read below is just one example of the hundreds of people I have worked with.  Their situation is unique to them and although you may find similarities between their situation and yours please don’t take the recommendations we made as recommendations for your situation. Every investor is unique and requires a personalized strategy for their particular situation.  My purpose in sharing this is to hopefully convey that many tools are often used in the accumulation phase of life, but turning ones savings into income for, hopefully, the rest of your life can require different tools and strategies.

We meet with people who come from a wide variety of backgrounds, different careers, and various goals for their life and differing amounts of money to help pursue those goals.  The one thing we hear from almost everyone is this; please help me set up a strategy to spend my retirement dollars in an appropriate manner so I don’t outlive my money.  In a nutshell, what they are saying is “don’t let me go broke before I pass away”.  There are numerous studies and surveys out there that say the primary concern amongst retired people is outliving their assets.  This is a very real fear for many.  This can cause a lot of stress and anxiety during a time when you should be relaxing and having fun.  With a proper retirement income strategy, we can hopefully turn that stress and anxiety into strength and comfort.  This is one of the things we enjoy doing the most.  Here is a real life example of how we did this for one family.

When I first met with this couple, the husband was 59 and his wife was 58.  I will call them John and Kitty (not their real names) and they both wanted to retire in the next 12 months.  They had a sizable nest egg but it was scattered around in a lot of different places.  John had money in a few different retirement accounts that were at various banks invested in Certificates of Deposit (CDs), money held in his employers retirement plan invested in various bond investments, more CDs not held in retirement plans, a few savings accounts and some collectibles, for example gold and silver.  Kitty had money in a couple different retirement accounts invested in stock and bond investment options and a large percentage of the money in her employers retirement plan was invested very heavily in her company stock and other investments.  When I asked them what their plan was for their assets, they stated they always thought they would move everything to CDs.  I believe this was their plan since they were most comfortable and knowledgeable with how CDs worked and liked the interest they had been earning on their existing, older CDs.

Many times, through the course of investigating a client’s current situation and investment strategy, we are able to spotlight some potential flaws or roadblocks.  Often times these potential roadblocks are based on either outdated market information or investor emotions.  For John and Kitty it was a combination. We did some simple math and tallied up all their investments and savings and determined if, hypothetically, they could find a CD that would yield them 5% per year this would, theoretically meet their income needs in the first couple of years and would allow them not to touch their principal at all.  Unfortunately, the current reality of CD rates are such that John and Kitty will be hard pressed to find anything yielding above 1%, leaving John and Kitty with a theoretical 4% shortfall.  They shared with me they never really thought what they would do if CD’s weren’t earning in the neighborhood of 5%.  They had been saving just enough money to make retirement a reality for them using that 5% number.

Unfortunately, they never anticipated lower rates and as I talked with them further they never really considered the rising costs of goods and services as time went on.  They failed to realize they may possibly need more than 5% interest per year to pay for inflationary increases in things like food, gas, property taxes, utilities and health care.  Thankfully, they had a nice nest egg and we looked at a variety of options to see how close we could help them get to their income goal.  In the end, their new retirement income strategy had a lot of moving parts, not just buy a CD every year or two and then buy another one when it matured.  In an effort to meet their needs for retirement but still keeping in mind their risk tolerance, time horizon and general suitability, our recommendations for their new strategy involved:

  • Choosing a different social security timing strategy, in order to help maximize income in the later years.
  • Spending down some of their existing cash leaving the other assets to potentially grow at a conservative rate.
  • Pushing back retirement just one extra year (which we were really hoping to avoid but that extra year of saving money and not spending their assets made a big difference in their retirement income projections).
  • We recommended that Kitty sell her shares in her company stock as that investment no longer met John and Kitty’s current risk tolerance. Also, we felt the money should be invested in in something that was more in line with their goals and objectives.
  • Putting some money into a joint fixed annuity with an optional living benefit, for an additional cost, that carried a guarantee to provide income of a set amount per year, every year, as long as one of them was alive. They still have control of the assets in case things changed and they needed flexibility.

We explored various types of fixed annuities that allowed some growth potential but had that all important guaranteed income for life provision as well (either via annuitization or the guaranteed annual income provided by the optional living benefit rider).  We recommended using a fixed annuity with a living benefit rider.  This helped secure a place for growth of principal long term, while also providing, through the rider, certainty that there would be a minimum amount of income at some point in time.

In the end, by recommending a variety of changes to their savings and investment line up and working for one more year, they were able to retire and perhaps more importantly, they have been enjoying retirement ever sense.  In developing their retirement income strategy considerations were made to account for the rising costs of goods and services.  We accounted for one or both of them living well into their 90’s.  Lastly, we helped make sure when they both pass away, their wishes to leave a legacy to their children and grandchildren can be fulfilled.

Over the years the more and more of these strategies that we’ve developed, we have learned many people approach retirement as having a certain amount of money set aside and while that is very, very important, there is a lot more that goes in to setting up a retirement income strategy.  The strategy should account for things like longevity, taxes, the rising cost of goods and services, when to take your social security income and your wishes for what happens to your money should you be taken from us.  We hope this one real life example gives you a glimpse into some of the aspects of setting up a retirement income strategy and may help provide you with some considerations on your journey.

Article Written By Larry Tate

This is a hypothetical example for illustrative purposes only. It is not indicative of any particular investment or guarantee of future performance.  Investments will fluctuate and may be worth more or less than originally invested.  Past performance is not indicative of future results
Financial Advisors do not provide tax or legal advice and this should not be considered as such. Please consult a tax or legal professional for advice regarding your specific situation.
An annuity is a long-term, tax deferred investment vehicle designed for retirement.  Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 ½, may be subject to a 10% federal tax penalty.  If the annuity will fund an IRA or other tax qualified plan, the tax-deferral feature offers no additional value.  Not FDIC/NCUA insured. Not bank guaranteed.  Not insured by any Federal Government Agency.  There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.  Living benefit riders and agreements are available for an additional cost and are subject to fees and restrictions.
All guarantees are based on the financial strength and claims paying ability of the issuing insurance company.
1992019/DOFU 2-2018

How much will I need and how much should I save for retirement?

Over the course of my career I would say one of the top ten questions I am asked, if not top five, is; how much do I need to save for retirement? Or phrased another way, what is my magic number? 

The answer to that question is; it depends.

Nobody likes hearing that answer but it is the truth.  Figuring out how much you will need at retirement is a complicated topic and unless we are sitting at a table together I don’t think I can give you a precise number.  But what I hope to accomplish in this guide is get you a number that is probably within the range of what you could need when you retire.  The numbers you are about to see might concern you…retirement is not cheap.  But with a good strategy and the determination to get there you can succeed.

We utilize a 4-Step process for retirement preparation that helps simplify your financial situation down to some basic information.  As I mentioned before, this isn’t going to be an exact number but should be in the ballpark.  As you get closer to retirement you will then be able to fine tune your strategy because you will hopefully have a better idea of what you want to do in retirement, where you plan to live and what your expenses are.  My 4-Step process is this:

  1. How much money will I need to have set aside at retirement that I can then turn into an income stream for retirement?
  2. How much money do I need to save each month to get to that nest egg?
  3. What financial vehicles could I use to work on building that nest egg in a tax-efficient way?
  4. What tactics/investments fit my risk tolerance and time horizon to help me meet my retirement goals?

If you have access to a financial calculator you will be able to get a more precise number for your situation. You will see some charts in the following articles that might get you close to your number but using a financial calculator or an online calculator is going give you a more tailored number for your situation.

Ready to begin?  If yes, please proceed to 

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Step 1 – How much money will I need in retirement?

How much money will I need to have set aside at retirement that I can then turn into an income stream for my retirement?

Our first step is determining how much money you will need to have sitting there at retirement, which you can then turn into an income stream for retirement so you hopefully never have to go back to work.  You will be paying yourself not to work!  How great is that?

The chart you will see below is an excel program I created so we could quickly come up with an approximate number using just your current income, years until retirement, what we assume the inflation rate will average per year and how much of your current income you think you will need to replace at retirement.  Many financial and economic experts recommend around 80% of your pre-retirement income should be replaced in retirement.  I will caution you though; I have worked with many people who spent MORE in retirement and many who have spent a lot less.  Use this as a general guide to get you started.

Also, if your income is going to most likely change significantly over time, you will want to account for that as well.  Hypothetically speaking, if you are a medical resident earning $50,000 a year but will be making $350,000 a year in private practice, you will want to use the $350,000 number as that will be the lifestyle you will be accustomed to.  This holds true for any profession where your income will most likely change considerably as time goes on.


“If you want to have a better performance than the crowd, you must do things differently from the crowd.”  –  Sir John Templeton


The way you read this chart is left to right.  Pick a number in the first column that is close to your current income or the income you feel you will most likely be at fairly soon.  In my chart I picked 30 years until retirement and used the long-term historical average for inflation as my theoretical assumption.  I also used a 75% income replacement rate for when you retire.  So if you are making $40,000 a year and have about 30 years until retirement then you will need about $1,456,000 sitting there at retirement.

Assumptions: This final sum of money is expected to produce an income stream for at
least 20 years if you withdrew exactly 5% and took no risk with the funds.  If you put the money in an interest bearing account, it could last longer.  If you choose to
invest it in variable, market based, investments it could last a lot longer or not as
long, depending on market performance.  Each person would want to analyze independentlywhat would be best for them and their assumed life expectancy.

Retirement Next Egg Chart

This hypothetical example is for illustrative purposes only. Not based on any particular investment. Investments will fluctuate and when redeemed, may be worth more or less than originally invested. Figures do not include transaction costs, taxes, or expenses.

If you are making $240,000 a year and have about 30 years until retirement you will need about $8,738,000.  The numbers look so big because the rising costs of goods and services over 30 years will be significant if we average 3% inflation.  Just ask your parents what they paid for their first home or first car and you will quickly realize what affect time has on money.

If you want a custom one for you please feel free to email me at larry@midwestwealthadvisors.com and I can send you one right away.  Just let me know the income you want me to use, how long until you retire, and the inflation and replacement rates you are comfortable using.

After the foregoing, let me hopefully give you some good news.  If you are participating in a 401k or 403b, hopefully your employer provides a match on the dollars you put in.  Even if it’s 1%, every little bit helps you in pursuit of your number.  Also, you may have an employer pension that could contribute to your retirement income in the future, that will help as well.  For those who feel social security will provide something at retirement, you could factor that in as well.  So the number might not be as daunting as you think.


For Step 2, please see the next post…Step 2 – Monthly Savings to Reach Retirement Goals

2107619 / DOFU 5-2018

Step 4 – Meeting my retirement goals

What tactics/investment vehicles may fit my risk tolerance and time horizon to help me meet my retirement goals?

There are a whole host of investments you can put your money in these days.  Some are products issued by investment firms, insurance companies, banks and federal/state/local governments.

  • CD’s
  • Bonds (Municipal, Treasury, Corporate, International)
  • Exchange Traded Funds (ETF’s)
  • Index Funds
  • Actively Managed Mutual Funds
  • Individual Stocks
  • Real Estate Investment Trusts (REITs)
  • Private Equity
  • Hedge Funds
  • Precious Metals

This list does not contain every investment out there, but these are the most common ones used.  Each has varying fees and expenses as well as advantages and disadvantages.  The important thing to know is which investments are going to be suitable for your risk tolerance and time horizon.  Also, this list isn’t meant to say that you pick just one and go with that.  The list is merely to show you what are some of the more common choices out there and you may find that several are a good fit for your portfolio and offer the diversification and return potential you need or desire.

Neither diversification nor asset allocation guarantee against loss, they are methods used to manage risk

“Look at market fluctuations as your friend rather than your enemy.  Profit from folly rather than participate in it.”  – Warren Buffet


I sincerely hope this series of articles was enjoyable and educational for you and I would love your feedback.  If you have any suggestions for improvement, or words of encouragement, please reach out to me at larry@midwestwealthadvisors.com

My hope is that the time you spent reading this was of value to you.  The goal was to provide you something to get you started on the retirement savings path or provide a check-up to see what you current financial strategy is doing and if you are on track to your retirement goals.  Hopefully you now have a good idea of what tools and strategies are available to possibly benefit your retirement, how much you may need to save, and some information about financial vehicles and investments that may work with your situation while also taking into account tax-sensitivities.

If you feel my firm can be of help on your journey, please call 763-428-0066 x3 or email appointments@midwestwealthadvisors.com to setup a No-Cost, No-Obligation, 25 minute phone call.

An even easier way to book your call is by clicking on the Click to Schedule button under my picture at the top of the page.

To Smarter Investing,

Lawrence B. Tate, ChFC

Financial Advisor

2107619 / DOFU 5-2018

How Important Is a Financial Plan?

This question has come my way many, many times over the last 15+ years.  And I am glad it has.  It’s a great question and it opens the door to fabulous conversations.

In my humble opinion, a fee-based financial plan is extremely important.  It acts as a blueprint to get you moving towards your financial goals.  Would you try and build a house without a blueprint?  You could try, and possibly succeed, but I highly doubt the end result would be as you initially dreamed up and I would imagine it would take a heck of a lot longer to finish that house and at a much higher cost.  And let’s not forget about the added stress…doesn’t seem worth it to me.  Would you ever head out on a two week road trip across the country to Florida or California without some sort of map, directions or way to guide you on your journey?  Of course not!  So why approach your financial life any different?

Whether you are dreaming about paying for your children’s college or putting together your goals, hopes and dreams for retirement, a financial plan will serve as the blueprint for working towards achieving those things.

A financial plan is not a static document that gets put together, and then sits on a shelf somewhere or in a computer file.  No, this plan should be reviewed annually.  Things change, life happens and you need your plan to change with you.

Already retired?  A plan is just as important for you as it is for those saving for retirement.  You need a plan to help ensure your income lasts as long as you do.

Separate from the financial plan and our role as financial planner, we may recommend the purchase of specific investment or insurance products or accounts.  These product recommendations are not part of the financial plan and you are under no obligation to follow them. 2011277/DOFU 1-2018

Spend and Replace Retirement Income Strategy

This strategy can be very simple or very complicated, depending on the unique needs of the investor.  A simple hypothetical example would be a person who has $200,000 and wants to spend $5,000 a year for 10 years and after those 10 years, be back to having $200,000.  So they might set $50,000 in a bank savings account and take $5,000 a year from that account.  But what should they do with the other $150,000?

With the other $150,000 they would need to find something with a a goal of generating 2.88% a year for 10 years.  If they found an investment that could potentially do that they would be back to $200,000 after the 10 years has passed.  As the name implied, they spent some money and completely replaced it.

The strategy can get more complex if need be to accommodate various income needs at different points in time.  For example, you may need $5,000 for 3 years then $10,000 for the next 3 years then need $0 for 2 years.  Using various Time Value of Money calculators you could craft a strategy to help meet those spending needs and replace that money by a later point in time.

Some people may prefer to use lower investment risk vehicles like CDs, Government Bonds or Fixed Annuities.  While others may use investments that carry additional market risk knowing they might not replace what they have spent but they are taking that risk in hopes of maybe having more.  There are many types of hypothetical scenarios I could come up with but hopefully you have general sense of the ‘spend and replace’ strategy.


This is a hypothetical example for illustrative purposes only.  It is not indicative of any particular investment or guarantee of future performance. Does not account for product fees or expenses. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.   2011298/DOFU 1-2018