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Helping Pre- Retirees Avoid Blunders
Advisors can help those about to rock into retirement overcome common mistakes .
By Eric L . Reiner
LIKE MANY ADVISORY SHOPS , WHITE Oaks Wealth Advisors in Minneapolis attracts prospects a few years shy of retirement . “ A lot of them have never put together a plan , but they ’ ve committed in their heads to a retirement date ,” says Laura Bereiter , the firm ’ s director of tax and financial planning .
Some clients are in good shape and can retire when they want . Others , she says , require a harder conversation . To them the firm is likely to say , “‘ Actually , based on your savings right now and what you want to spend in retirement , we think you need to work for three to five more years .’”
Pre-retirees are likely suffering from many misconceptions and are prone to missteps . One of their most routine failures is underestimating how much longer they are going to live .
“ We have a client who recently turned 103 ,” says Matthew Saneholtz , president of Tobias Financial Advisors in Plantation , Fla . “ A big concern that people often don ’ t think about is if you want to retire at 60 and you live to 100 , that ’ s 40 years of nonwork . That ’ s a lot of time to cover without any wage income .”
Compounding the problem is that many folks contemplating life after work don ’ t know their ideal retirement ’ s cost . “ That ’ s the biggest number going into it — what it ’ s going to take to retire the way they want to retire ,” Saneholtz says . “ Maybe they want to travel but they don ’ t know what it ’ s going to cost . Maybe they don ’ t have all their retirement goals fleshed out . We help paint the picture for them , and then we figure out what might be the best strategy to meet that spending goal , how we ’ re going to help them get there .”
One of the things they must watch out for is healthcare , he says , adding that it ’ s “ a big expense most people don ’ t think about .” Health insurance can be particularly costly for an early retiree . But even Medicare-eligible people age 65 or older get sticker shock .
“ They don ’ t realize that , on average , Medicare is going to cost at least $ 400 to $ 600 a month , all in , per person ,” says Christopher Fundora , director of retirement planning at Traphagen CPAs & Wealth Advisors in Oradell , N . J .
And that ’ s without Medicare ’ s income-related monthly adjustment amount ( also known as IRMAA ). This can add hundreds of dollars to monthly premiums for Medicare Parts B and D , a nasty startle for the approximately 8 % of enrollees cursed to pay it . In 2024 , it hits single taxpayers whose 2022 modified adjusted gross income exceeded $ 103,000 ($ 206,000 for joint filers ).
How To Add Value
When a client ’ s income falls in retirement , however , they can thwart the higher premiums with the Social Security Administration ’ s Form SSA-44 . This document can be used to request that a client ’ s IRMAA calculation be based on their lower , in-
48 | FINANCIAL ADVISOR MAGAZINE | JANUARY / FEBRUARY 2024 WWW . FA-MAG . COM