Allworth Advice: Planning for retirement? Focus on these seven key areas – The Cincinnati Enquirer

Amy Wagner and Steve Sprovach  |  Cincinnati Enquirer

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Question: Stephen and Jenn in Springdale: What do you believe are the most important financial things to consider when planning for retirement?

A: We’re glad you’re asking this question because most people aren’t. In fact, according to a 2020 study by the TransAmerica Center for Retirement Studies, only 18% of current retirees have a retirement plan that’s actually written down. And 42% don’t have a retirement strategy, period.

What we’ve found over the years working with clients from all walks of life from throughout the Tri-State is that there are essentially seven major ‘decision points’ that need to be addressed when planning for your retirement:

  • Retirement income needs (determining what income you’ll need to replace when you stop working)
  • Expense and debt management (analyzing how to reduce debt loads prior to retirement)
  • Tax planning (strategically planning the kinds of retirement accounts you use and also the timing of retirement withdrawals and the amounts)
  • Investment management (maximizing the returns on your investments to create sufficient income to preserve your principal)
  • Risk management (controlling or minimizing the impact of unforeseen events on your money)
  • Estate and legacy planning (deciding in advance what will happen to your money and possessions when you’re gone)
  • Distribution and income sources (analyzing the best sources from which to derive your income, and in what sequence)

Here’s the Allworth Advice: Preparing for retirement is something most people think about but many hesitate to actually begin. In our experience, the people who live well throughout their retirement usually do so because they took the initiative and worked with a trusted financial advisor adviser to create a personalized plan that comprehensively addresses these seven main areas.

Q: Andrew in Ludlow: I owe about $5,000 in taxes this year. I’m thinking about paying that with a credit card to get the rewards. Is there any downside to doing this?

A: First and foremost, if you’re going to go this route, we hope you’re a responsible credit card user who pays off your credit card bills in-full every month. Otherwise, you’ll end up paying interest charges on this $5,000, which, bluntly speaking, would be a pretty foolish move just to get reward points.

However, let’s give you the benefit of the doubt and assume you are a responsible credit card user. The only other word of caution we have for you is that the IRS charges an additional fee for paying your tab via credit card. Depending on the payment processor or service provider you choose, this fee can range anywhere from 1.87% up to 3.93% (and in most cases, there’s typically a minimum dollar amount as well). So, in your case, you would be spending somewhere in the range of $94 to $197 extra for the luxury of using a credit card. And don’t forget to compare your rewards percentage to the fee percentage – if your card offers a lower reward percentage than the fee you’re paying, this probably doesn’t make sense.

The Allworth Advice is that paying your taxes with a credit card can sometimes be a reasonable option, but only if you pay your credit card off each month and the rewards exceed the transaction fees.

Every week, Allworth Financial’s Amy Wagner and Steve Sprovach answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Responses are for informational purposes only, and individuals should consider whether any general recommendation in these responses is suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing, including a tax adviser and/or attorney. Retirement planning services offered through Allworth Financial, an SEC-registered investment adviser. Securities offered through AW Securities, a registered broker/dealer, member FINRA/SIPC. Call 513-469-7500 or visit allworthfinancial.com.