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Freedom for Retirement™ is the podcast designed to help you move beyond the fear of the complexity of finances so you can be financially free to achieve personal significance. Tune in with Josh Duncan each week to turn fear into fuel that drives you into Freedom & Significance.
Welcome to the Freedom for Retirement Podcast.
If you're a high-earning professional, business owner, or someone approaching retirement
and wondering whether you are truly on track, you are in the right place.
This podcast is all about helping you make smart, confident financial decisions without
the fear, confusion, or sales pressure that so often comes with money advice.
Each episode is designed to break down complex topics like retirement planning, investing,
taxes, and cash flow in plain English.
So you can understand what really matters and avoid the most common and costly financial
mistakes.
Everything you hear here is educational, fiduciary focused, and grounded in real-world
planning experience working with clients just like you.
I'm your host, Josh Duncan, partner at F5 Financial Planning.
Let's get started.
Are you halfway through the year and wondering whether your retirement plan is still on
track?
Maybe the year started with a clear plan.
You knew where your income would come from, how much you expected to spend, and what major
decisions that you needed to make.
But now life has happened.
Markets have moved, spending may be higher than expected.
Maybe you took a trip, helped a family member, started Social Security, completed a home
project, or had an unexpected expense.
And before you know it, the end of the year will be here.
That is why a mid-year retirement checkup can be so valuable.
I'm Josh Duncan, partner at F5 Financial Planning, where we take a fiduciary approach to
maximizing our clients' wealth.
In today's video, we're going to walk through five things retirees and pre-retirees should
review before the year gets away from them.
We'll talk about your retirement income plan, your spending, whether your portfolio has
drifted and needs rebalancing, your tax withholding, Roth conversion opportunities, and
Medicare-related income planning.
The goal is not to make your financial life more complicated.
The goal is to catch small issues while they are still small.
Because one of the biggest mistakes people make in retirement is waiting until December or
even tax time next year to realize something should have been reviewed months earlier.
A good retirement plan is not something you set once and ignore.
It's something you monitor, adjust, and keep aligned with your life.
So let's walk through the mid-year retirement checkup.
The first thing to review is your retirement income.
plan and your spending pace.
This sounds simple, but it is one of the most important parts of retirement planning.
Before retirement, income usually has a rhythm.
A paycheck comes in every couple weeks, taxes are withheld, retirement contributions
happen automatically, the structure is already there.
But in retirement, you may be creating your own paycheck.
Your income might come from Social Security, pensions, IRA withdrawals, brokerage
accounts, dividends, interest, rental income, part-time work, or some combination of those
sources.
That means you need to know not only how much income you need, but where that income is
coming from and whether the plan is working the way you expect it.
Mid-year is a great time to ask a few practical questions.
Are you spending more than you planned?
Are you spending less than you planned?
Did any large expenses show up that were not included in the original plan?
Are you pulling money from the right accounts?
Is your cash reserve still where it needs to be?
And are you coordinating your income plan with your tax plan?
Here's a simple example.
Let's say you retired earlier this year and expected to spend a certain amount each month,
but halfway through the year, you realized travel costs were higher, insurance premiums
increased, and you helped an adult child with a major expense.
None of those things may be a problem by itself, but if you do not review them, you may
end up taking larger withdrawals later in the year than expected.
Those withdrawals could affect your taxes, your Medicare premiums, or your long-term plan.
On the other hand, some retirees have the opposite problem.
They're spending far less than the plan supports because they are afraid to draw from
their portfolio.
They saved for decades and now it's time to use the money.
It feels uncomfortable.
That's understandable.
But retirement planning is not just about making sure you never run out of money.
It's also about using your money intentionally to support the life you work so hard to
build.
A mid your review helps you see whether your actual spending lines up with your plan.
The key takeaway is this: do not wait until the end of the year to find out whether your
retirement income plan is working.
Review it while there is still time to make thoughtful adjustments.
The second mid-year checkup item is your portfolio.
The point here is to ask whether your portfolio has drifted from the investment strategy
your plan actually requires.
Markets do not move evenly.
Some parts of the market may grow faster than others.
Some may lag.
Over time, your portfolio can look very different from the allocation you originally
intended.
That is portfolio drift.
And whether your portfolio drifts, the question is not what do I think the markets will do
next week?
The question is, does this portfolio still match my long-term plan?
Rebalancing is not market timing.
It's the discipline of selling high and buying low.
It's the process of bringing your portfolio back in line with your intended allocation.
For example, if US large cap equities have had a strong run, your allocation may be higher
than intended, or maybe one area of your portfolio is lagged.
And now your allocation is tilted away from where you wanted it to be.
I mean your review gives you the opportunity to look at that intentionally.
This is where retirement planning often gets oversimplified.
You may hear advice that says investors should simply own fewer equities as they get
older.
But that misses a very important point.
The real risk in retirement is not just short-term volatility.
The bigger risk is failing to maintain enough long-term growth to support your lifestyle,
keep up with inflation, and avoid outliving your money.
Inflation does not retire when you do.
Your grocery bill, utilities, insurance, property taxes, healthcare costs, and travel
costs, along with everyday living expenses, can continue rising for decades.
And if your retirement could last 25, 30, or even 35 years, your portfolio needs to be
built for more than stability.
It also needs to be built for purchasing power.
That is why equities play such an important role in long-term retirement planning.
They are the growth engine of a portfolio.
Bonds may serve a purpose in certain plans, but they were not designed to be the primary
engine.
For beating inflation over long periods of time.
So when you review your portfolio mid-year, the goal is not to run away from market risk.
The goal is to make sure your portfolio still supports the plan.
Has your allocation drifted?
Do you need to rebalance?
Are your investments still aligned with your cash flow needs?
Are you holding enough cash or short-term reserves for near-term spending so you're not
forced to sell long-term investments at the wrong time?
Is your portfolio still positioned to help you pursue your goals over the full length of
retirement?
That
is the right conversation.
Not fear, not guessing, not automatically becoming more conservative just because another
birthday passed.
The key takeaway is to review your portfolio for drift, rebalance when appropriate, and
stay focused on the real objective, which is funding your life with confidence over time.
The third item in your mid year retirement checkup is tax withholding and estimated
payments.
This is one of those areas that can quietly create problems if you ignore it.
When you were working taxes may have been withheld from your paycheck automatically.
You might not have
thought much about it because the system was already doing a lot of the work.
But in retirement that can change.
Social Security may not have enough tax withheld.
IRA distributions may have withholding, but only if you set it up.
Pension income may have withholding.
Brokerage account income, capital gains, dividends, interest, and rental income may not
have enough withholding attached to them.
That can lead to a surprise tax bill.
And nobody enjoys getting to tax time and realizing they were underpaid all year.
Our tax system is a pay as you go system.
The IRS expects taxes to be paid throughout the year, either through withholding or
estimated payments.
For retirees, this is especially important because income can come from multiple places.
You may have Social Security, IRA withdrawals, dividends, interest capital gains,
part-time income, and maybe even a Roth conversion in the same year.
Each income source may be taxed differently and each may have different withholding rules.
Mid-year is the perfect time to ask whether enough tax has been paid in so far.
This is especially important.
If something changed during the year, maybe you started Social Security, sold an
investment, or took a large IRA distribution, or maybe you simply did not have as much
withholding as you thought.
The goal is not to calculate your tax return perfectly in June or July.
The goal is to avoid being surprised.
A tax projection can help you estimate your income, deductions, withholding, and expect
the tax liability before the year is over.
Once you know that, you have options.
You may be able to adjust withholding from IRA distributions.
You may be able to make estimated tax payments, you may be able to change the timing or
income deductions, and you may be able to coordinate with your tax professional before it
becomes urgent.
This is also where retirees sometimes miss an opportunity.
They think tax planning only happens when they file their tax return, but tax filing and
tax planning are not the same thing.
Tax filing looks backwards, tax planning looks forward.
By the time you file your return, years already over.
Many of the best planning opportunities may be gone.
So the key takeaway to this.
is use the middle of the year to check whether your tax payments are on track.
A little planning now can prevent a frustrating surprise later.
The fourth mid-year checkup item is Roth conversion planning.
A Roth conversion is when you move money from a tax-deferred account like a traditional
IRA into a Roth IRA.
When you do that, the converted amount is taxable in the year of the conversion.
But once the money is in the Roth IRA, it may grow tax-free and may be withdrawn tax-free
later if the rules are met.
Roth conversions can be powerful, but they are not automatically right for everyone.
They need to be evaluated in the context of your full financial plan.
Mid-year is a good time to review Roth conversion opportunities because you still have
enough of the year left to estimate your income, your tax bracket, your deductions, and
your cash flow.
This can be especially important for people in the years between retirement and required
minimum distributions.
For example, let's say you retire in your early 60s, you're not yet taking required
minimum distributions.
You may not yet be receiving Social Security, or maybe only one spouse is receiving
benefits.
Your taxable income might be lower than it was during your working years and lower than it
will be later in retirement.
That window can create a planning opportunity.
You may be able to convert some IRA money to Roth at a lower tax rate than you might face
later.
Why does that matter?
Because if a large portion of your retirement savings is in traditional IRAs or
traditional 401ks,
The IRS has not taxed that money yet.
At some point, withdrawals from those accounts may become taxable income, and required
minimum distributions can force money out later, whether you need the income or not.
That can create higher taxable income in your 70s and beyond.
May also affect Social Security taxation, Medicare premiums, and the taxes paid by a
surviving spouse.
So the Roth conversion question is not simply do I want to pay tax now or later?
The better question is, what is the most strategic time to pay tax on this money?
Sometimes paying tax earlier can reduce future tax pressure, but sometimes Roth conversion
does not make sense.
If the conversion pushes you into a tax bracket that is too high, creates Medicare premium
issues, causes cash flow problems, or uses money you should keep liquid, it may not be the
right move.
That is why mid-year planning is so helpful.
You can run the numbers before December.
You can estimate how much room you may have in a tax bracket.
You can look at charitable giving plans, you can consider capital gains, you can factor in
Medicare income thresholds, and you can decide whether a partial Roth conversion fits your
situation.
The word partial is important.
Roth conversion planning is often not an all-or-nothing decision.
For many people, the question is how much to convert in which year and from which account.
The key takeaway is this: Roth conversions should be planned, not rushed.
Mid year gives you time to evaluate whether a conversion supports your long-term tax plan.
Okay, the fifth mid-year retirement checkup item is Medicare related income planning.
This is a big one for retirees.
Many people know that Medicare has premiums, but not everyone realized that higher income
can lead to higher Medicare premiums through something called IRMA.
IRMA stands for income related monthly adjustment amount.
In plain English, it means that if your income is above certain thresholds, you may pay
more for Medicare, Part B and Part D.
And this can surprise people because Medicare uses a look back period.
Your premiums for a future year may be based on income from a prior tax return.
That means a decision you make this year could affect Medicare premiums later.
This is where Roth conversions, capital gains, IRA withdrawals, property sales, business
income, and large taxable events can all matter.
Now, I do not want to overstate this.
Avoiding Irma should not be your only goal of your retirement plan.
Sometimes it may still make sense.
To do a Roth conversion, sell an investment, or realize income, even if it creates higher
Medicare premiums later.
The mistake is not paying IRMA, the mistake is being surprised by it.
Mid-year is a good time to estimate your income, where it's going to land for the year,
and you can also look at your adjusted gross income, tax exempt interest, capital gains,
IRA distributions, Roth conversions, and other income sources to see whether you may be
close to a Medicare income threshold.
This matters because IRMA thresholds.
Work like cliffs, a small amount of additional income may push you into the higher premium
tier.
Again, that does not mean you should avoid every dollar of income.
It means you should make informed decisions.
For example, let's say you are considering a Roth conversion.
The conversion may be a smart for long-term tax standpoint, but if it pushes you just over
an arma threshold, the real cost of the conversion may be higher than the income tax
alone.
This is also important for married couples.
When one spouse dies, the surviving spouse.
Is eventually going to file as a single taxpayer.
That can change tax brackets and Medicare income thresholds.
Planning ahead can help reduce the risk that the surviving spouse faces higher taxes and
higher Medicare premiums later.
The key takeaway is this: Medicare premiums are part of retirement tax planning.
Do not wait until the premium notice arrives to find out that last year's income created a
higher cost.
So
If you are retired or getting close to retirement, here are the five mid-year items I
would encourage you to review.
First, review your retirement income plan and spending pace.
Make sure the way money is coming in and going out still matches your plan.
Second, review whether your portfolio has drifted and needs rebalancing.
This is not about becoming more conservative simply because you're older.
It's about keeping your portfolio aligned with your goals, your income needs, and your
need for long-term growth.
Third, review tax withholding and estimated payments.
Retirement income often comes from multiple sources, and you do not want a surprise tax
bill because not enough was paid in during the year.
Fourth, look at Roth conversion opportunities if you are in a lower income window.
There may be a chance to move money from tax-deferred accounts to Roth accounts in a
strategic way.
Fifth, estimate whether this year's income could affect Medicare premiums.
Irma should not control every decision, but it should be part of the conversation.
The bigger message is this: retirement planning is not a once-a-year event.
It's an ongoing process of keeping your money aligned with your life.
When you review these items before the year gets away from you, you give yourself more
time, more flexibility, and more confidence.
At F5 Financial Planning, we believe good advice should help you make.
Thoughtful decisions across your investments, taxes, income plan, estate plan, and
long-term goals.
Because the purpose of financial planning is to help you use your wealth wisely so you can
live with clarity, confidence, and purpose.
If you found this episode helpful, please consider subscribing to the podcast and leaving
a review.
It helps more people find the show and continue learning how to make smarter financial
decisions.
I'm Josh Duncan, partnered F5 Financial Planning.
If you would like to learn more about how we help our clients achieve financial freedom
for personal significance, please visit our website at www.f5fp.com.
Thanks for listening, and I'll see you in the next episode.