(UPDATED) The 3 Things You Need To Retire On Your Terms According to David Giertz

It reaches a time when work and employment become so overwhelming that one just feels like retiring early. This is especially when you think of the good times you can have and enjoy as a free man, a non-employee.

That is entirely possible; you know, early retirement. However, when you think of such a step, are you really ready for it? For instance, is your savings account loaded enough to take you through the years you will be away from work?

If you are possibly thinking of withdrawing your savings too soon, think again. This is because retirement accounts will be up your neck looking to punish and penalize you.

David Giertz is a financial advisor with over 30 years of progressive experience in the financial services industry.  This inspirational and visionary leader definitely has a lot to offer. As alumnae from the University of Miami and Millikin University, David has been the president of Nationwide Financial’s sales and distribution organization.

His operating skills and efficiency as president earned the organization consistent profitable revenue that even exceeded the P&L targets. He is a certified business coach with WABC and has been involved with quite a number of community organizations.

Back to the issue of early retirement, David Giertz had some advice to offer epodcastnetwork. According to him, for one to successfully retire and not have any regrets afterwards, one has to be financially independent. He went ahead and talked of three steps through which one can achieve such independence.

1. Save enough money

You can never know how much money you will need after you lay down your employment tools. Therefore, David Giertz strongly advises that people should save as much as they can while still working.

A person following the standard retirement program for instance should aim to save ten times their annual income by the age of sixty. This is so that by the time they retire five years later, they will have up to 15 times their income stashed away for use.

With that calculation, it means that a person looking to retire much earlier, say at the age of 50 or 55, will have to work extra hard and save up more times their annual salary.

2. Have a flexible retirement plan

Several retirement accounts always penalize people for withdrawing their savings early. To avoid such punishment therefore, David Giertz advises that a person looking to retire early should choose a flexible plan.

One option would be to first go with a Roth IRA. This plan allows one to withdraw money anytime, without any penalties. However, a Roth is only limited to people earning less than $118,000 annually.

Then there is also the 401(k) and the 72t rule. All this retirement plans will at least make it easier for a person looking to retire early since they have minimum restrictions.

3. Invest

According to David Giertz, investing one’s extra savings will help increase their chances of early retirement. The after-tax accounts for instance are more flexible than the retirement accounts. Therefore, supplementing your retirement savings account with a different account will enable you to buy and sell currencies, bonds, stocks and many more.

With after-tax accounts, you will invest as much money as you want and also make withdrawals at any time. Alternatively, put some extra money in a health savings account. The money will come in handy in future to take care of health care costs.

But these aren’t the only aspects of retirement planning that can affect your future. There are other concerns that will need to be addressed.  It’s not enough to simply save, and hope for the best.  You need to have a legitimate plan, including what type of account you want, how you’re going to pour enough money into your account, etc.  You also need to account for expenses, and other major concerns.

As a veteran in the financial industry, David Giertz knows there are astute questions that need to be answered before taking the plunge in retirement. According to David, the most important factor that a person should consider before retiring is determining how they will support themselves and their lifestyle. David says that although many people have a desire and an earned right to retire, they often simply cannot afford to do so. That statement is supported by the raw data.

So few people have actually considered what they spend per month now, versus how they would cut that spending.  The fact of the matter is that most people end up spending more in their first few years of retirement.  Not exactly something you can afford to do for every long.

With more senior citizens having to return to work after finally retiring and then becoming a “greeter” at Walmart or Home Depot, the facts are clear that the financial burdens on American retirees are simply hard to ignore. There is also a significant rise in retirees becoming roommates and needing to share resources. Having a roommate while you’re in college is expected, but at age 70 or 80, that is not supposed to happen. However, the fact remains that a large number of Americans are significantly underfunded when the time comes to retire.

David found through his extensive research that many Americans are relying solely on savings. He points out that savings are just not going to be enough to support a person any longer. There are many factors that go into a person’s lifestyle expenses that are essential during retirement, which aren’t apparent during the working years. David believes that people are not well-prepared for the shock of the unexpected circumstances that arise after retirement. However, he says that savings are an important factor that anyone considering retirement should absolutely consider.

David suggests that potential retirees ask themselves how much they can save as opposed to how much they believe they will need. He believes that maximizing savings is the key to an early start for retirement. Considering that life expectancy has increased, there is a far less chance of saving enough money for retirement. Therefore, David says that Americans should find creative and strategic ways to capitalize on other financial opportunities to maximize their savings.

How does your current savings strategy stack up to your expected life-span?

In order to determine how much you will be able to save, David recommends that you first get a reality check. He cautions that the results may not be what you hoped for, but he highly suggests complete transparency if there is any hope of retiring with financial security. As a Certified Business Coach, David has a world-class Gallup associate engagement score that represented an 87 percentile and created an opportunity to provide input for helping more than 100 business leaders successfully achieve certification.

Compulsory Minimum Distribution Technique

The Internal Revenue Service (IRS) has mandates on certain portions of your retirement savings. It’s called Required Minimum Distribution (RMD). With the RMD table from the IRS, you can calculate exactly the amount of money that must be withdrawn from any retirement savings plan, once you reach 70 ½ years old. Although the IRS has factored in life expectancy, it is based on an average statistic formula. However, there will be variations for future decades that reflect those life expectancy changes, which could increase or decrease the minimum age.

There are four important factors to remember with an RMD:

• A withdrawal can exceed the minimum amount without any risk of a penalty by the IRS.
• Any withdrawal will be subject to your taxable income with the exception of previously taxed income.
• Savings withdrawals that are considered tax-free are exempt from the mandate.
• A withdrawal from a Roth IRA is not required until the owner of the account has become deceased.

With the exception of the above conditions stated by the IRS, it is required that a withdrawal is made, or you will be subject to penalties, which could result in a hefty 50 percent tax bill. Under certain exceptions, the IRS can waive the penalty if an account holder files IRS form 5329. The IRS considers a waiver based on a reasonable error and when reasonable steps are taken to remedy the shortfall for the required distribution. It’s important to note that the Center for Retirement states that the minimum age should be 65 and suggests that retirees consider implementing the four percent rule to offset any shortfall.

Four-Percent Rule Defined by David Giertz

The four-percent rule is a common method that is used to calculate a person’s retirement savings. Although you will continually increase your savings, the theory suggests that when you continue to save and offset the amount by four-percent as a rule, beginning at age 65, you will be less likely to become cash insufficient. The formula has inflation factored in for the proceeding years as well as considerations for lower-rate markets and during an economic recession. Through his research on the rule, David found that a 2013 study showed only a 57 percent likelihood of financial retirement success when using the four percent method. He says that it’s far better for you to begin with one percent to know if you can avoid the possibility of becoming completely insolvent, which will be more than enough to determine if retirement is in your future.

Planning a Structured Income Using an Annuity

According to David Giertz, the best type of an annuity is one that has a deferment that is based on a specific date you decide on and then begins paying you directly once a month. Although annuities are generally higher in fees, he believes they are best-suited for retirees in order to not only plan much better but to also have a guaranteed and fixed income. Retirement is a time when uncertainty should be limited as much as possible, as opposed to adding any ambiguity. Typically, you will structure payments on a monthly basis.

However, David also adds that payments can be customized in order to fit your specific lifestyle and financial situation. Because all payments are amortized to the penny, an annuity is actually a good resource in addition to other available savings opportunities. David also says this is a more secure way of knowing if you will be disciplined enough to handle being retired with a structured income, as opposed to what you’re currently used to as a wage earner. However, he says the pros definitely out way the cons of not having any structured plan for guaranteed income at all.

Why you should consider making investments on social security income from David Giertz on Vimeo.

Healthcare Costs Become Essential during Retirement

An essential part of determining retirement is in knowing how your healthcare cost will be covered. Are you planning on relying solely on Medicare for healthcare benefits? If you are, David says that is a very big mistake. More likely than not, once you reach the age of 65, you will meet the guidelines to qualify for Medicare, but that does not mean that you will have benefits to cover all of your healthcare needs. The Employee Benefit Research Institute conducted a thorough analysis and concluded that on average it would require a single person to save $370,000 to even come close to a 90 percent possibility of having all health care costs covered during the life of retirement.

The fact that Medicare does not cover all services has a lot to do with this figure. In addition, Medicare only covers 80 percent of your doctor’s visits, which means that you have an out of pocket expense for the remaining 20 percent. Many retirees purchase Medigap and that expense must be factored into any retirement savings plan as a mandatory expense.

The following are Medicare exclusion services:

• Hearing aids.
• Vision care, including eye exams and glasses.
• Nursing home care.
• Most dental care.
• Dentures or replacements.
• Long-term care or custodial care.
• Routine podiatry care.

David cautions potential retirees to also consider that the Affordable Care Act (ACA) has remained uncertain. Health care costs have continued to rise in the U.S. and the fact that the ACA has not been finalized is like waiting for the other shoe to drop. It is almost certain that health care cost will continue to rise as well as prescription costs. Additionally, if you plan on using any retirement savings plan, David recommends not to rely on any government subsidies when it comes to retirement, because acquired assets will be considered by the government and will likely disqualify most applicants.

Tax Obligations Continue Even When Earned Income Stops

Your tax obligation continues until you’re deceased. There is no way to get around that reality, even when retiring. Have you considered how you will pay the taxes on any withdrawals made from a retirement saving plan, other than a Roth 401 (k) or Roth IRA? The taxes need to be at least estimated and factored into your overall retirement plan.

An important part of planning for retirement includes being able to forecast and calculate your taxes. Your tax liability will be derived from the income budget you set up; however, it can be estimated. Based on the new tax reform bill passed in late 2017, your tax liability has likely already changed as well as the deductions that you’re permitted to claim when you file.

Another important point to remember about your tax liability is to consider whether you plan on claiming social security benefits. Your personal income will affect your tax liability on your social security benefits, which could amount to a minimum of 50 percent, but as much as 85 percent. Additionally, you could owe state taxes on the same amount of money received.