A retirement income plan is a timeline that lays out where your retirement income comes from year-by-year, explains Don Dirren, a financial advisor. You can write it out on graph paper, build an Excel spreadsheet, or use a specific software to help you visualize your retirement income plan. What’s most important, says Don, is that you have the plan in the first place.
Here are four easy steps you can take to create a comprehensive retirement income plan for yourself and (if applicable) your spouse.
Make Your Template First Advises Don Dirren
Your template should start with one row for every calendar year. List your (and your spouse’s, if applicable) age next to each year. You’ll want to extend your projection through both of your life expectancies.
It’s best to be overly optimistic here, explains Don Dirren. Better to plan for your care well past when you’ll need it than run out of money because you lived longer than expected! The average lifespan in America is 78.5 years, but that’s an average of millions of people – you may easily live into your 90s with luck and good medical care.
After you’ve made rows (horizontal) for each year of retirement, add columns (vertical) for each income item. We’ve laid out a list in the next section to help you determine what income items to add to your plan.
List Your Fixed Sources of Retirement Income
The next step is to list your fixed sources of retirement income, says Don Dirren. Don’t include one-time or uncertain sources of income like expected inheritance, just in case they don’t pan out. That way you can be certain of living within your means and use any unexpected windfalls as a bonus or fun money!
Sources you may want to add to your list include:
- Your (and Your Spouse’s) Social Security
- Your (and your Spouse’s) Pension(s)
- Annuity Income
- Other Income (i.e. Rental Income, Alimony, etc.)
- One-Time Income Sources (Insurance Payouts, Net Proceeds from Sale of Property, etc.)
Don Dirren advises that you do not include sources like capital gains, interest, or dividends as those are variable. Your plan is meant to help you calculate how much you will need to withdraw from your financial accounts to source your lifestyle.
List Your Expenses
Now you will add all of your annual expenses – including taxes! If you have a mortgage or other large debt that will be paid off within a few years of retirement, list that in a separate column so you can account for its dropping off once it’s paid.
Your tax rates will depend completely on your individual circumstances. Calculate your total income and deductions with the help of a financial advisor or tax planner, suggests Don Dirren.
Calculate the Gap Between Expenses and Income
Once you’ve listed all of your income and subtracted all of your expenses, you’ll be left with a number, says Don Dirren.
If that number is negative, you’ll have to be able to withdraw that amount from savings and investments to pay for your expenses. Usually, this means it’s time to find new sources of income or decrease your expenses.
If that number is positive, you should decide how you will invest or save that money to create a bigger financial buffer for yourself.
Don Dirren Shares 5 Things You Can Do Now to Reduce Your Tax Burden in Retirement
If you’re like most people, you don’t want to watch your hard-saved retirement dollars dwindle into nothingness due to high taxes. Fortunately, there are things you can do today that will help you avoid high taxes in retirement. Don Dirren is a financial advisor and risk management expert located in Arizona. He shares five things you can do now to help reduce your tax burden when you retire.
1. Invest in More Tax-Free Mediums
Some retirement investments or savings are considered tax-deferred. You receive a discount on your taxable income now equal to the amount invested in these options. This includes things like traditional 401(k)s and Individual Retirement Accounts (IRAs).
When this occurs, you’re not avoiding taxes on the money. Instead, you’re deferring your taxes until you withdraw those funds in retirement. You should absolutely take advantage of employer-sponsored traditional 401(k)s, especially if your employer is matching funds.
However, you should also consider investing in tax-free options. With these options, you use the money you’ve already paid taxes on to invest. Then, when you withdraw funds from these accounts in retirement, you do not need to pay taxes a second time. These include Roth IRAs and Roth 401(k)s.
2. Plan Your Retirement for the Big Picture
This means you need to be mindful of the types of retirement accounts you have. While you have little control over the type of 401(k) your company offers, you can control your IRA investments. More importantly, you can choose the types of investments that go into various accounts.
For instance, you’ll want to take advantage of the most tax-efficient investment options for your taxable retirement accounts. These include things like:
-Tax-exempt municipal bonds.
-Exchange-Traded Funds (ETFs).
-When it comes to tax-free accounts, you’ll want to use tax-inefficient investment options. These include things like:
-Real Estate Investment Trusts (REITs).
-Doing these things will help you to preserve your gains without unnecessary tax burdens for your efforts.
3. Be Mindful of Required Minimum Distributions (RMDs)
Once you reach the age of 72, it is necessary to withdraw at least a minimum amount from your IRAs and 401(k)s annually. Failing to do so can result in hefty penalties, up to 50 percent of the required distribution amount. You will have to pay taxes on the income from traditional IRAs and 401(k)s withdrawn in this manner.
The goal, Don Dirren states, if you’re hoping to reduce your retirement tax burden, is to plan now to have as little as possible invested in taxable accounts. You want the bulk of your investments in tax-free mediums. Ultimately, you want to plan so that your withdrawn income doesn’t accidentally place you in a higher tax bracket.
4. Time Your Withdrawals Wisely
You do have some flexibility when it comes to the timing of your withdrawals. Consider working with a financial advisor to help you time your withdrawals so that you can avoid a large tax bill and maintain a lower tax bracket from year to year.
Long-range tax planning can help you understand the best strategy for year-to-year withdrawals so that you can coordinate your Social Security benefits so that you can maximize your income while minimizing your tax burden throughout retirement.
5. Choose Your Retirement Location Wisely
Many people focus their attention only on federal taxes when planning for retirement. The fact is that many states have substantial state income taxes to consider as well. You could choose a retirement location that further maximizes your tax savings by moving to one of the many states that either has no income taxes or low income taxes, such as:
Of course, you will want to do your own research into costs of living to determine which state has the most to offer you in the way of maximizing your retirement income. Other states, like Arizona, Indiana, South Carolina, and Tennessee have low income tax burdens. While New York, Maryland, California, Minnesota, and Oregon have among the highest.
Don Dirren understands the challenges of planning a tax-efficient retirement. These tips will help you get more mileage from your money when your time to retire comes around.
Donald Dirren Discusses the Mental and Physical Benefits of Hiking
Hiking is an outdoor activity that comes with many perks, says Donald Dirren. Fresh air, beautiful views, the sights and sounds of nature…they all have a profound effect on the nervous system. And though hiking is mostly known as a physical activity, it greatly benefits your mental and emotional health as well.
Hiking is Excellent Cardio Says Donald Dirren
Usually, when you’re hiking, you are walking over uneven terrain. And whether you’re hiking uphill or down, the intervals make walking an even more beneficial form of exercise. Cardio lowers your risk of heart disease, helps burn calories and control your weight, and improves blood pressure and blood sugar levels.
Hiking also strengthens your core and your lower body. As you walk over uneven terrain, your core engages to help you keep your balance, and the muscles in your lower body flex and work to keep you moving. This burns calories and builds muscle, both of which contribute to keeping a healthy weight, states Donald Dirren.
Hiking Boosts Your Mood
As an excellent form of exercise, hiking releases endorphins, dopamine, and other feel-good chemicals into your brain as you walk and climb. This can drastically improve your mood and help fight off the symptoms of depression and anxiety.
It’s not just the exercise that’s good for the soul though, says Donald Dirren. Being outside in nature is its own tonic. Science backs up this opinion wholeheartedly. Did you know that even looking at a picture of a tree can lower your blood pressure significantly and release chemicals like serotonin and dopamine? All of this contributes to a drop in cortisol, which is a stress hormone that contributes to inflammation, over-eating, and anxiety.
Hiking Strengthens Your Bones
You probably aren’t thinking about your bone health when you decide to go for a hike, but it’s an excellent form of exercise–especially for those with osteoporosis or arthritis. Because walking is a body weight-bearing exercise, it strengthens bones by increasing cell production, says Donald Dirren. This can help combat the effects of osteoporosis by improving bone density and slowing calcium loss, both of which make your bones less likely to break.
A study performed by the University of Washington had women with osteoporosis walk for an hour three times a week and measured their bone density and strength. Those who followed the regime saw a six percent increase in bone density in just nine months!
The University of Washington found that women with osteoporosis who walked for one hour three days per week increased their bone density in the spine and other parts of the body by 6 percent over a nine-month period. Just make sure you’re waking with good posture to get the most benefit from your hiking, Donald Dirren explains.
Donald Dirren Discusses Why Golf is a Great Activity for Retirees
Looking for a great way to get in shape, have fun, and maintain social distancing? Donald Dirren believes golf should top the to-do list, especially for seniors. Here’s why.
Many people have put on extra weight and grown out of shape in recent months owing to the COVID-19 pandemic. With gyms and other exercise facilities shut down and unhealthy foods offering socially distanced enjoyment, a lot of people have gained weight. Right now, a good workout might go a long way. Donald Dirren argues that golfing offers a great escape for seniors and others.
“Golfing is a pretty relaxed sport, especially as far as physical strain is concerned,” Donald Dirren says. “But you can get quite a lot of exercise, especially if you skip the cart and walk. If you don’t have the stamina to play 18 holes, just play 9 holes.”
While many gyms shut down during the COVID-19 pandemic, a lot of golf courses remained open. Now, even more golf courses are opening up, and you can maintain social distancing without interrupting the game.
“One of the best parts about golfing right now is that social distancing was the norm even before the pandemic,” Donald Dirren says. “You might play with a group of friends, but everyone else on the course will typically stay away. Often, there are hundreds of yards between you and the people playing both in front and behind you.”
While it can be hard to get people to adjust to social distancing rules in the grocery store or at work, the nature of golf, and long instilled habits, make social distancing easier to follow. Further, since the coronavirus is killed by sunlight, and golf courses are often quite sunny, the risk of exposure is lowered. Even if the person in front of you has the coronavirus, it’ll likely die off before you’re exposed.
Donald Dirren Talks About the Health Benefits of Golfing
Golfing is a great activity amid the COVID-19 pandemic not just because it’s safe, but also because you can get a good workout. Fortunately for seniors, golfing is also not especially taxing, especially regarding strain.
“Walking is one of the best low-impact workouts around,” Donald Dirren argues, “especially if you go on a walk for a few hours at a time. When you go golfing, you spend a lot of time walking, assuming you skip the cart of course. Yet you’ll rarely over-exert yourself, especially if you have a proper swing.”
Play basketball or soccer, and you may find yourself running a lot and potentially colliding with other people. While that might be fine for young adults, seniors may quickly find themselves out of breath and banged up. Golf isn’t a contact sport and doesn’t require running. Just make sure you know how to properly swing.
“If you swing the club wrong, you could pull out some muscles,” Donald Dirren points out. “That said, by developing proper form and not over-exerting yourself, you can reduce the risk of strains and pains.”
Golf may seem like a game of leisure, says Don Dirren, but it requires a lot more strategy, agility, hand-eye coordination, and strength than it may look like. And even after you are able to understand and grasp the basics of the game, you’ll spend the rest of your life working to tweak and improve your game.
Whether you’re new to the game, or an old golf pro, these tips from Don Dirren, an avid golfer, can help you lower your score and have more fun on the course. It’s not just about how you hold the club or follow through on your swing. You also have to take the course and weather conditions into account and master your mental game. Golf is a complex and challenging sport.
Check Your Alignment Says Don Dirren
A big mistake that a lot of players make is allowing themselves to shoot out of alignment, says Don Dirren. If you don’t aim with your body facing the target fully square, your brain will overcompensate in either direction, and you’ll miss by a mile.
So before you spend hours and hours changing up your swing, try working on your alignment to improve your shots, states Don Dirren. You can use alignment sticks at the driving range to make sure you’re shooting square. Still not sure whether it’s your swing or your aim? Have a friend record you swinging and check how you’re squaring off against the target.
Don’t Neglect Your Short Game
Everyone loves their driver, explains Don Dirren. But are you giving the same amount of love to your wedges and putters? Once you’ve made that all-important initial shot, you’ll be spending the rest of the time on the putting green. That makes improving your short game one of the best and easiest ways to shave points off of your score.
A lot of golfers would rather work on their drive shots, but if you can’t close the deal on the putting green, all that work on your driving form means nothing. It can be a little frustrating, but practice makes perfect, encourages Don. The more effort you put in on your bunker shots and bump and runs, the more improvement you’ll see in your game.
Take a Deep Breath
Golf looks like such an idyllic and leisurely sport when you watch it from the clubhouse, says Don Dirren. But once you get on the course, it’s a whole different story. Even though you’re playing against other people when you play golf, your real opponent is yourself. Your swing, your aim, your alignment…it’s a lot of pressure to perform that you’re putting on yourself.
This can make it extra frustrating when you miss that putt from a few feet away or the wind seemingly plucks your ball right out of the air and throws it into the water feature. But when you find yourself in a potentially frustrating situation, close your eyes, take a deep breath, and remember that you’re playing this game because it’s fun. Even the professionals hit bad shots – that’s just a part of the game!
Once you retire, your income will typically come from three sources – Social Security, retirement account distributions, and funds from investments and savings. Your income level will determine what tax strategies you can use to minimize how much is taken from your income by the federal and state government. You should talk to a financial advisor about how to protect your income and your retirement savings, says Donald Dirren, a financial advisor in Phoenix, Arizona.
There are several ways to minimize taxes on each source of income you take in as a retiree.
Live in a Tax-Friendly State Advises Donald Dirren
As we readjust in the wake of the Tax Cuts and Jobs Act, living in a tax-friendly state is more important than ever. Through 2025, only $10,000 in sales tax, state income, local income, and local property taxes will be deductible for the purpose of federal income taxes.
There are currently seven states with no income taxes:
- South Dakota
- Tennessee (in 2021)
Because the federal government does not allow the states to tax residents on retirement benefits earned in another state, relocating to a state with no income taxes can help you avoid state taxes on your income, explains Donald Dirren.
We realize that not everyone is able or willing to move just for tax purposes. But if you were considering moving anyway, why not choose a place that benefits your financial well-being?
Postpone or Avoid RMDs
You do not have to pay taxes on your required minimum distributions (RMDs) from your IRA if you are at least 72 years old and you are transferring the funds to a charity.
This is a relatively new development, says Donald Dirren. The age for RMD used to be 70.5 years old, but it was raised to 72 in the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act.
To qualify, you must transfer the funds directly to an IRS-approved public charity, and you must receive a receipt or written acknowledgment from the charity. There is an annual limit of $100,000 (per spouse in the household).
It is also important to note, says Donald Dirren, that this applies only to IRAs, not Roth IRAs, which are not subject to RMDs. Simple IRAs and SEP IRAs are also excluded.
Talk to a Professional
These are only two of the dozens of financial strategies you can employ to protect your income from being reduced by taxes, says Donald. He advises that you talk to a licensed financial advisor or wealth manager about your options to ensure that your income will carry you through your retirement.
Donald Dirren has been a licensed financial advisor for over 30 years in Phoenix, Arizona. His specialty is retirement planning and education, and his passion is helping Arizona seniors protect, preserve, and pass on their wealth. He is one of the top Safe Money Specialists with Bergen Financial Group and has a strong presence throughout Arizona as the owner and operator of two independent brokerage firms.
Donald Dirren Explains Two Myths About Buy & Hold – A Tried and True Investment Strategy
Financial planner, Donald Dirren is a 30-year veteran in this sphere. As an alumnus of Arizona State University, ASU is a resounding force in his industry. Arizona is considered a moderately friendly state for retirees in terms of taxation. Because his specialty is working with retirees, he is well known.
Donald Dirren makes it plain – what exactly is “buy and hold”? It is considered a passive strategy when it comes to stock investment. Investors buy stocks and then hold them for an extended period no matter what occurs in the stock market.
Myth number one – the cost of stock is unimportant. However, there are some common misconceptions or “myths” about the buy-and-hold strategy. One misconception is that the price of the stock purchased is irrelevant. Buy-and-hold is not a cut-and-dried strategy. There are certain nuances that only professional financial advisors are aware of. In other words, it is always important to have a professional help you understand the stock market and how it works before you plunge in. Donald Dirren is that person for his clients. His professional acumen is incontrovertible.
Common myth number two the implication that the whole strategy of buying hold ignores risk. Buy-and-hold does not mean that every fluctuation in the stock market is good because the end justifies the risk. The nuances of the buy-and-hold strategy are best navigated by a professional. It is not a black-and-white approach. The fact is that every day in the stock market will not be a good day even for buy and hold strategists.
You can learn more about buy-and-hold facts with a simple consultation with Donald Dirren. He is currently a top Safe Money Specialist with Bergen Financial Group. Here he maintains his focus on retirement planning and educating his clients on ways to protect, preserve, and bequeath their wealth to their loved ones. During the course of educating his clients, Donald Dirren adds his own experiences to the coursework. He has lived through or witnessed firsthand many real-life scenarios that he can effectively present to his clients. This addition makes the financial content easier to understand.
Donald Dirren is known throughout the financial industry in the state of Arizona due to his ownership of two independent brokerage firms. He also operated these firms making him an individual with vast experience and knowledge. In addition to his familiarity with the buy and hold investment strategy, Donald Dirren is expert at Social Security planning, tax planning in retirement, and how to manage life insurance products for seniors and those in long-term care.
Don Dirren is a business assessment professional who has years of experience providing help for many companies. In 2020, he saw the transformations caused by the Covid-19 pandemic and helped many firms stay open in the face of this problem. And he recently provided details on risk assessment for 2021, including what issues are likely to remain an issue (and how to solve them).
The Risks Don Dirren Sees in 2021
The year 2020 was, putting it mildly, a devastating time for the economy. With thousands of businesses closing forever due to the pandemic, Don Dirren and many other experts have watched the market and examined the risks inherent in its operation. And Don Dirren believes that the risks in 2021 will be similar to those in 2020 — though there is a light at the end of the tunnel in his assessment.
First, Don Dirren believes that economic risks will continue to be a problem for many companies. These risks occur when a business doesn’t have a strong enough cash flow. With stores shutting down amid governor orders, Don Dirren believes it is essential to prepare for this danger immediately. Find new ways to offer services and goods, such as deliveries or socially distant operations.
These commercial risks include not only a weaker cash flow but a smaller number of potential customers. Don Dirren knows many states are limiting attendance at businesses, cutting back on financial success. Try to integrate outdoor seating environments, if possible, to expand this facet. Renting seating areas in other outside regions also helps benefit many companies as well.
Don Dirren suggests a professional business assessment long before these problems impact your company. A vital evaluation like this can examine other business risks, such as misjudged market demand. Many companies during Covid-19 are either expecting too much market demand or too little and suffering. Getting an assessment minimizes this risk, Don Dirren says, by providing an objective look at the situation. You can use this information to plan your approach based on real market demands.
Inadequate competition assessment is another risk Don Dirren believes will become a problem in 2021. Even though the business world has slowed, many competitors likely still exist for your services or products. Don Dirren suggests assessing the strength of your competitors and your market share compared to theirs. Try to adjust your business approach to exist in whatever pocket you possess.
Lastly, Don Dirren is concerned that many businesses may not create workable business strategies in the face of 2021. Too many companies coasted through 2020 on old techniques that worked by inertia through the pandemic. As this health danger stretches into 2021, now is the time to focus on social distancing strategies, delivery options, curb-side sales models, and expanding the digital marketplace as the most effective option for increasing a business’ presence.
Don Dirren Shares the Best Online Resources for Investment Research
Profitable investing often takes a lot of work. Don Dirren would know. He’s a finance expert who has helped countless people plan for retirement. And when it comes to investing, Donald Dirren believes that knowledge really is power. That’s why he’s going to share some of the best online resources for investor research and education.
“These days, you have more educational opportunities than ever before,” Don Dirren argues. “You can take classes at your local college, you can enroll in online classes, buy ebooks, whatever. If you’re completely new to investing, I recommend checking out something like the Stock Market from Scratch for Complete Beginner’s class on Udemy. You can sometimes gain access to the class for twenty dollars or less.”
He also notes that you can buy a lot of ebooks on Amazon. Sometimes, these beginner investing books are free or cost just a few dollars. He suggests looking for books with a lot of high reviews.
“With investing books, quality can vary,” Don Dirren claims, “however, there are a lot of cheap, facts-focused books. Getting the basic investing facts right isn’t difficult. When it comes to cultivating investing strategy, you need to do more research and make sure that the expert is, in fact, an expert.”
If you’re willing to spend big on your investing education, Don Dirren recommends looking at Warrior Trading’s online classes. These classes can cost upwards of several thousand dollars, however.
“Warrior Trading has a great reputation and they’re known for being very comprehensive,” Don Dirren says. “Their courses are pricey, but a lot of their students will tell you the cost was worth it.”
Don Dirren Shares Some Free Online Investing Research Resources
Looking for some low-cost investing research opportunities? Don Dirren has you covered.
“Investopedia is one of the oldest, most trusted brands as far as online investing education goes,” Don Dirren points out. “They cover pretty much everything. Whenever you’re doing research, I always recommend getting a second opinion, but Investopedia is a site every investor should check out.”
Don Dirren also notes that Investopedia offers a popular stock simulator. With this simulator, you use fake money to purchase fake assets, with prices being tied to live markets. This lets you test investing strategies and research conclusions without having to risk real money.
“Using a stock simulator is an excellent way to start your investing career,” Don Dirren says. “And Investopedia’s stock simulator is among the better simulators.”
Another favorite resource is Seeking Alpha. This website sources content from a huge number of contributors, both professional and amateur. Mr. Dirren says this offers a great way to source a lot of opinions.
“Seeking Alpha is an excellent website and you can quickly see how other investors think,” Donald Dirren says. “I would caution readers, however, that the articles mostly represent opinions, not facts, and even the best investors can get it wrong.”
Why Investing In Life Insurance Early Makes Sense, With Financial Advisor Donald Dirren
When you’re young and single, you probably don’t give a lot of though to end-of-life plans, or how to protect people you haven’t even met yet from the financial burden associated with a loved one’s death. That being said, doing so now can pay off in dividends down the line. According to financial planner Donald Dirren, investing in life insurance early can set your family up for a comfortable financial future – even if you have yet to meet your future family members.
Donald Dirren says that the cheapest time to sign up for life insurance is usually right this moment. The earlier in life you sign up for life insurance, the less you’ll pay each month. The Discovery of family health conditions can also increase the cost of life insurance, according to Donald Dirren. When you sign up for life insurance now and purchase permanent insurance, your rate is locked in for life. The amount that you pay toward your policy today will not change with age, no matter how your health or family information may change over time, according to Donald Dirren. If you pay $35 per month for your life insurance policy now, you’ll still be paying $35 a month 30 years from now, while your contemporaries may be paying double that price due to taking out a policy later in life.
Signing up for life insurance now also protects the people who would be responsible for your end-of-life costs should an unforeseen circumstance arise. Whether your adult siblings or your parents would be responsible for managing your affairs, the last thing you want is to leave them with a burden. While you may not have a spouse or children yet, naming a close loved one as a beneficiary on your life insurance policy can help to ease some of the stress on family members should an unexpected death occur, according to Donald Dirren.
If you’re thinking about having a family in the future, investing in a life insurance policy now is one of the most loving things that you can do for your yet-to-be-born children, according to Donald Dirren. When you set your children up for a successful financial future, you’re affecting your family positively for generations. If you have a significant other and you’re starting to have serious talks about a future together, be sure to bring up taking out permanent life insurance policies, according to Donald Dirren. While these conversations may feel uncomfortable at first, Donald Dirren says that they’re an incredibly important step in any long-term financial plan.