5 Things Every Retirement Plan Needs Before You Quit Working with Joe Schmitz Jr.

A complete retirement plan goes beyond investments. Jeremy Keil and Joe Schmitz Jr. explain five areas to address before retirement, including income, taxes, investments, healthcare, and estate planning.

You’re planning to retire in the next 12 months. 

Are you ready?

Joe Schmitz Jr., founder and CEO of Peak Retirement Planning, joined me on the Retire Today podcast to talk about how you might go about making sure your answer to the previous question is more confidently “YES”. 

Joe joined “Retire Today” earlier this year and because our approaches to retirement planning have many points where they intersect, I invited him back to discuss this topic:

If you were going to retire in the next 12 months, what should you do to help ensure that you feel more prepared for life in retirement?

Why Retirement Requires More Than Investment Management

Joe specializes in working with what he calls the “2% Club”—people who have both a pension and at least $1 million saved for retirement.

As Joe explained, these diligent savers often arrive with a question I’ve heard many times myself:

“I don’t know what I don’t know.”

That’s actually the title of Chapter 4 in my book, Retire Today, and I think it captures an important challenge when you’re approaching retirement.

You may have spent 30 or 40 years becoming very good at your career and very good at saving money. But you’ve never retired before.

Suddenly, you need to coordinate decisions about Social Security, pensions, taxes, investment withdrawals, Medicare, estate planning, and how much you can actually afford to spend.

Joe also pointed out another concern that comes up frequently. In many marriages, one spouse has historically handled most of the finances. Creating a coordinated plan and establishing a relationship with a planning team can provide some peace of mind that if that spouse dies first, the surviving spouse isn’t left trying to figure everything out alone.

That requires considerably more than choosing investments.

The 5 Areas Joe Includes in a Retirement Plan

Joe organizes retirement planning around five pillars: tax planning, investment planning, income planning, healthcare planning, and estate planning.

Tax planning is particularly prominent in his process. His firm has a CPA in-house and looks at strategies such as Roth conversions and tax-efficient retirement income. Rather than treating taxes as something you deal with after the year is over, the goal is to plan ahead.

Investment planning is another pillar, but notice that it isn’t the entire process. Investments have to work alongside the income a retiree needs and the taxes those withdrawals may create.

Income planning addresses how to turn the assets you’ve spent decades accumulating into the money you’ll actually use in retirement.

Healthcare planning includes decisions about Medicare, supplemental coverage versus Medicare Advantage, long-term care, and potential Medicare IRMAA premiums.

Finally, estate planning considers not only where your assets will eventually go, but how they’ll get there and what purpose you want them to serve.

For diligent savers, that last question can become particularly interesting. Joe said many of his clients are unlikely to spend everything they’ve accumulated. That can open a broader discussion about whether they want to spend more themselves, give more to family during their lifetime, or increase their charitable giving.

Where the Retirement Master Plan Fits

My five-step process approaches many of the same issues from a slightly different direction.

Step 1: Spend. Determine how much you expect to spend in retirement.

Step 2: Make. Identify where your retirement paycheck will come from, including Social Security, pensions, and your investments.

Step 3: Keep. Develop a lifetime tax strategy so you’re thinking beyond what you’ll owe on this year’s tax return.

Step 4: Invest. Match your investments to what you’ll need in the short term and what you’ll need in the long term.

Step 5: Leave. Make sure your estate plan reflects what you want to leave behind and how you want to leave it.

One thing stood out as Joe and I compared the two processes: investments come relatively late in both.

That’s intentional.

You need to understand your life and your retirement needs before deciding how your investments should be structured.

Too often, people start with the portfolio and then attempt to arrange everything else around it. I think that reverses the process.

Your investments are there to serve your plan.

A Retirement Plan Can Also Give You Permission to Spend

Diligent savers don’t automatically become comfortable spenders when they retire.

Joe shared one example of how he’s worked with someone who told him they need $7,000 per month to live comfortably. After running the retirement calculations, they discovered they could afford $11,000.

Every situation varies and the results of these decisions aren’t guaranteed to match this example, but in this particular situation they could put the difference into the plan as “permission money.”

If someone needs $7,000 but the plan supports $11,000, that additional $4,000 per month—or roughly $50,000 per year—represents money they could use for an extra trip, a different car, time with family, or something else that’s important to them.

The answer isn’t to force someone to spend money simply because they can.

It’s to determine the purpose of the money.

Maybe you spend more on experiences with your family. Maybe you give money to your children while you’re alive and can watch them use it. Maybe charitable giving becomes more important.

As Joe put it:

“I think it’s a really valuable thing to find more purpose with their money.”

I agree. Start with the purpose, then determine what spending is necessary to make that purpose possible.

5 Things to Address Before You Retire

Later, I asked Joe what someone planning to retire within the next 12 months should do before telling their employer they’re done.

His five recommendations closely paralleled my own.

1. Run the Retirement Numbers

Before you retire, determine what you can realistically afford to spend.

For some people, the calculation may reveal a shortfall that needs to be addressed. For diligent savers, the more surprising result may be discovering that they can afford to spend more than they expected.

Either way, you want that information before the paycheck stops.

2. Create a Tax Plan

Retirement can change your tax situation considerably.

Joe discussed forecasting future income and tax brackets, evaluating Roth conversions, considering capital gains, and understanding how Social Security may be taxed.

My approach is to think in terms of a lifetime tax strategy. Instead of focusing exclusively on reducing this year’s taxes, look for opportunities to manage what you may pay over the course of retirement.

3. Reevaluate Your Investments

The portfolio that helped you accumulate money during your working years may not be structured appropriately for taking money out in retirement.

I like to begin by identifying what you’ll need in the short term and what you won’t need until much later. Your short-term investments should actually be appropriate for short-term needs, while money intended for much later in retirement can be invested with a longer time horizon.

4. Know Where Your Healthcare Will Come From

If you’re retiring before 65, determine how you’ll obtain health insurance before Medicare eligibility.

If you’re Medicare eligible, you’ll still have decisions to make about your coverage.

Healthcare shouldn’t become something you figure out after you’ve already given notice at work.

5. Get Your Estate Plan in Order

Review your will, powers of attorney, beneficiary arrangements, and any other estate documents appropriate for your circumstances.

And don’t just have the documents drafted. Make sure they’re actually completed, signed, and reflect what you want to happen.

The goal isn’t merely to leave money behind. As I describe it in my five-step process, you want to leave a little more money and a little less mess for the people who come after you.

Look for a Process, Not a Product

After comparing our approaches, Joe and I arrived at perhaps the most important point of the discussion.

Retirement planning isn’t about finding the right product.

If your first interaction with a financial advisor begins with a particular investment or financial product you supposedly need to buy, Joe considers that a potential red flag.

The planning process should come first.

Should you complete a Roth conversion? When should you claim Social Security? How should you create your retirement paycheck? How much can you afford to spend? How should your investments support those decisions?

The answers depend on your circumstances.

Joe also suggested another useful question when evaluating an advisor: Are they proactively bringing these issues to you, or are you constantly bringing the issues to them?

Retirement rules, tax laws, your finances, and your life will continue changing after you retire. Your plan needs a process for responding to those changes.

You don’t need a collection of disconnected financial pieces.

You need a retirement plan that puts those pieces together.

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About the Author:

Jeremy Keil, CFP^®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retire Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

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Additional Links:

• Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
• Peak Retirement Planning
• Joe Schmitz Jr. on YouTube: https://www.youtube.com/@peakretirementplanninginc. 
• Articles by Joe Schmitz Jr. on Kiplinger
• “Joe Knows Retirement” podcast with Joe Schmitz Jr. 
• Books by Joe Schmitz Jr. 
• Retire Today Episode 292: Are You in the 2% Club in Retirement? With Joe Schmitz Jr.

Connect With Jeremy Keil:

• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Mr. Retirement
• Book an Intro Call with Jeremy’s Team

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