Are You a DIY Retirement Planner? Four Things You Need to Know

While saving is a huge part of retirement planning, tax efficiency and estate planning can be just as important, especially once you actually retire.

A man uses a hand saw on a piece of wood, only his hands showing.
(Image credit: Getty Images)

I was working with a couple who had a great retirement awaiting them. They had done a great job saving throughout their working years and had amassed a retirement nest egg of $2 million. They surely had enough to retire comfortably. The question wasn’t whether they would have enough money; instead, it was whether they were maximizing their hard-earned life savings.

They had done well on their investments, but the rest of their plan had no focus, and they were missing important details. These weren’t mistakes that would cause failure, but they were mistakes that could cost them hundreds of thousands of dollars over the course of their retirement. They needed to understand that when you have saved millions of dollars and enter into retirement, your focus shifts.

A cookie-cutter plan concerned only with saving and growing investments is no longer useful. You now have to consider more sophisticated planning based on taxation and estate plans. For example, people with significant savings often need to know:

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  • How to fund their lifestyles in the most tax-efficient way now that they no longer have incomes
  • Advanced tax strategies like Roth conversions and how much to convert each year in a smart way
  • If they need more sophisticated estate planning documents or trusts in place
  • How to ensure tax-smart distributions to beneficiaries when they pass

Many of the people who schedule time with us are complete DIYers, as we call them. They love it, and it even seems like a hobby for them. However, many of them end up choosing to work with us for the following four reasons.

1. Advanced tax strategies.

Many DIYers who come to us feel fairly confident on the investment side of things. Although they may not necessarily have the best investment structure in place, their strategies have done well enough. The real concern comes from tax planning and knowing what strategies are out there to save money on taxes. It makes sense that many people do not know how to do this because the rules change so often. If you are not reading the tax code and staying up to date on changes, then you may be missing out on opportunities (this is something we see often with this group.)

It is also, in my mind, the most important financial pillar to plan for, considering taxes will most likely be the biggest expense in retirement. Most of the time, we are able to show DIYers enough value in tax savings and other financial planning guidance to make the fees worthwhile.

2. Lack of knowledge of tax rules and changes.

No one wants to make mistakes with their money or leave money on the table because they’re not able to stay up to speed on ever-changing tax rules. If they do not spend every day studying financial planning, they may not be up to date on everything or aware of all the strategies they are missing. If this is you, you have to ask yourself: How many retirements have you successfully planned? And is it worth trying to DIY something this important when you’ve never done it before? Would you ever work with an adviser who has no experience besides managing their personal investments? That is technically the decision you are making by DIYing your retirement.

3. Delegation.

Those who have saved successfully and are ready to enjoy their retirement are usually more interested in focusing on enjoying their time and not having to worry about reading tax law changes or following investments. For such people, the question is: Will it be worthwhile to pay a fee to an adviser to give you more time and peace of mind?

I am a big fan of delegation in my personal life. I try to delegate everything that someone can do better than me, as well as anything I do not enjoy. The time and money saved from avoiding mistakes is everything to me. I get to do what I love most: spending time with my family, traveling, exercising and working in my business.

A great example of why delegation is important occurred when I once tried to fix a plumbing issue. It took me more than 10 hours. I did not have the tools, so I had to go to the store to buy everything. Then I had to spend more time than an expert because I had not done it before and had to watch YouTube videos to learn what needed to be done. I had to waste my entire weekend. Instead, I can pay a few hundred dollars to a plumber, have no worries and save my time. I like that concept.

4. Assistance for the surviving spouse.

Many of these DIYers do a great job planning their retirements and get many of the key points established. They may be successful on their own, but when they are gone, will their surviving spouse be as capable? More often than not, we find that one side of the marriage is finance-oriented, and the other is not.

Are you confident your spouse will be able to decide how much to convert each year or how to rebalance and make adjustments to the investment portfolio? Will your spouse know which investments to use for income?

The other question to consider is: Do you want to decide who your spouse’s adviser will be, or would you rather your spouse choose? If they do not have as much knowledge about financial planning, then they may not pick the best adviser team to serve them and may not know what to look for when vetting different firms. As we all know, there are advisers out there who do not always do the right thing.

If you are a DIYer and these points don’t apply to you, or maybe you are okay without having a plan for these issues, then you may not have to worry and should continue on. Sometimes, doing it on your own because you enjoy it can be worth missing a few details. At the end of the day, it’s your plan and your choice what the future of your life savings and retirement will look like!

 Here are a couple of videos that may help you on your journey:

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Joe F. Schmitz Jr., CFP®, ChFC®
Founder and CEO, Peak Retirement Planning

As Founder and CEO of Peak Retirement Planning, Inc., Joe Schmitz Jr. has built a comprehensive retirement planning company focused on helping clients grow and preserve their wealth. Under Joe’s leadership, a team of experienced financial advisers use tax-efficient strategies, investment management, income planning and proactive health care planning to help clients feel confident in their financial future — and the legacy they leave behind. Joe has also written a book, titled I HATE TAXES. You can find Joe on YouTube by clicking here, where he creates educational videos for those in or near retirement. If you would like to talk to Joe’s team, you can schedule a meeting by clicking here.