Do you have a dollar amount in mind that you need to have before you retire? Have you thought about how much of that amount will be taken in taxes when you begin to use it?

Imagine being that poor, misguided mountain climber who didn't pack the right gear and didn't possess the skill to both climb up to the top of the mountain, and more importantly, get back down again safely. Planning for retirement is a lot like that mountain climber.

-Foundation for Financial Wellness

Video Transcript

On May 29, 1953, Sir Edmund Hillary became the first confirmed climber to have reached the summit of Mount Everest. Mt. Everest’s peak is a dizzying 29,029 feet. And, despite the risks, thousands swarm to Nepal every year in an effort to conquer the tallest point on Earth. Many of them never leave.

In fact, over 250 bodies remain on Everest, giving it claim to the title of the world's largest open-air graveyard. While most deaths occur due to avalanches, falls, and exposure to the harsh elements, the area known as the “Death Zone” holds a terribly high body count and comes with its own unique set of problems.

Not unlike retirement and all of its unique set of potential problems! In fact, it is reported that more than half of the deaths that occur on Everest, happen on the decent...yes, on the way down!

Think of saving money for your future like climbing a mountain. Imagine being that poor, misguided mountain climber who didn't pack the right gear and didn't possess the skill to both climb up to the top of the mountain, and more importantly, get back down again safely. Planning for retirement is a lot like that mountain climber.

Before you retire, you save your money. That's your accumulation phase. During retirement, you climb down from the peak of the mountain by taking money out of your retirement account. That's your distribution phase. Seems simple enough, but it's not. And that's because the math changes dramatically at the top of the mountain when you account for the taxes you will owe. Although your journey appears to be two distinct planning phases, it's really just one continuous, but evolving expedition.

What most people think of as Retirement Savings tools are geared only for the climb up (the saving for retirement). They are not as concerned about the climb down...when we retire and begin withdrawing those saved dollars and all too often getting surprised by how much of those dollars Uncle Sam demands from us in the form of income taxes.

OK, now a quick review for you to decide if you have any decisions to make or any actions to take.

Not much to do just yet on the topic of taxes as we have more lessons ahead with action items for you. If you’re a planner, then I’d suggest you pull out the tax file and review last year’s personal taxes because it will help put our next lesson on taxes in more context.

As always, don’t forget to take advantage of your private counseling session. It’s included, it’s private and confidential and always with one of our Certified Financial Wellness Counselors. To schedule your counseling session, simply click on the "Request Counseling" button.