The New Retirement Playbook: Taxes, HSAs, and the Biggest Risks Most People Miss

Why You Owe Taxes, How HSAs Build Wealth, and What’s Changed About Retirement Forever

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A practical guide to avoiding IRS surprises, maximizing tax advantages, and planning for a longer retirement.

Dollars & Sense Episode Summary

Retirement planning today looks nothing like it did a generation ago – and if you’re still relying on outdated assumptions, it could cost you more than you think.

In this episode of Dollars & Sense, Joel Garris walks through three critical areas that directly impact your financial future: how to avoid an unexpected tax bill, why Health Savings Accounts (HSAs) may be one of the most underutilized retirement tools available, and how the entire retirement landscape has fundamentally changed.

“The IRS operates on a pay-as-you-go system — if you don’t keep up, you’re not just paying taxes, you’re paying penalties too.”

The conversation starts with a common problem many taxpayers face every year – owing money to the IRS. The U.S. tax system operates on a “pay-as-you-go” structure, meaning taxes are expected to be paid throughout the year, not just at filing time. When that doesn’t happen, it can lead to penalties, interest, and financial stress. Joel explains how to correct this through smarter tax withholding strategies, estimated payments, and better use of tax documents as planning tools rather than paperwork to ignore.

From there, the episode shifts into one of the most powerful yet misunderstood financial tools available today: the Health Savings Account. While many people view HSAs as simple healthcare spending accounts, Joel highlights their unique triple tax advantage — pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. With healthcare costs continuing to rise, HSAs have evolved into a long-term planning vehicle that can play a major role in retirement income strategy, especially when used strategically over decades.

“A health savings account is the only account in the tax code with a triple tax advantage — there’s nothing else like it.”

The final segment explores a larger and more important reality: retirement itself has changed. People are living longer, pensions are disappearing, and inflation — particularly in healthcare and insurance — is hitting retirees harder than ever. A traditional 20-year retirement is now often a 30–40-year reality, significantly increasing the risk of outliving your money. Joel explains why conservative portfolios alone may not be enough and why investment strategies must be aligned with the time horizon rather than age.

“The biggest risk in retirement today isn’t market volatility — it’s longevity risk and outliving your money.”

Throughout the episode, one theme becomes clear: successful retirement planning today requires flexibility, adaptability, and proactive decision-making. Whether it’s managing taxes throughout the year, maximizing tax-advantaged accounts like HSAs, or building a portfolio that can grow over decades, the old “set it and forget it” approach simply doesn’t work anymore.

If you’re approaching retirement or already there, this episode provides practical insights to help you avoid costly mistakes and build a more resilient financial future.

10 Key Takeaways

1. The IRS expects taxes to be paid throughout the year, not just at filing time
2. Adjusting your W-4 or making quarterly payments can prevent costly penalties
3. Social Security is still taxable and often a major reason people owe money
4. HSAs offer a unique triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses
5. HSAs are not “use it or lose it”—they can be invested and used decades later
6. After age 65, HSAs gain flexibility similar to IRA accounts
7. Retirement today often lasts 30–40 years, increasing longevity risk
8. Inflation disproportionately impacts retirees, especially healthcare and insurance costs
9. Conservative portfolios alone may not provide enough growth for long-term retirement needs
10. Flexibility and adaptability are more important than trying to create a perfect financial forecast

Episode Chapters

00:00 Introduction: Taxes, HSAs, and Retirement Planning Overview
02:00 Why You Might Owe Taxes and What It Means
04:00 Understanding the IRS Pay-As-You-Go System
06:15 Adjusting Tax Withholding (W-4 Strategies Explained)
07:30 Quarterly Estimated Payments for Investment and Self-Employment Income
09:15 Social Security Taxation and Common Mistakes
10:15 Rising Healthcare Costs and Financial Planning Impacts
10:30 What Is a Health Savings Account (HSA)?
11:45 The Triple Tax Advantage Explained
13:00 HSA Eligibility and High Deductible Health Plans
14:00 How HSAs Evolved Into a Retirement Planning Tool
15:30 Advanced HSA Strategies and Long-Term Benefits
16:45 HSA Rules Before Age 65
18:00 HSA Changes After Age 65 and Medicare Considerations
19:30 Using HSAs for Retirement Income and Flexibility
20:00 Why Retirement Has Fundamentally Changed
21:30 Longevity Risk and 30–40 Year Retirement Planning
23:00 Inflation and Its Impact on Retirees
25:30 Why Conservative Portfolios May Fall Short
26:45 Time Horizon vs. Age in Investment Strategy
27:45 Healthcare Costs and Medicare Considerations
28:30 Retirement as a Transition, Not a Hard Stop
33:30 Flexibility vs. Perfect Forecasting in Retirement Planning
35:15 Final Thoughts: Tax Planning, HSAs, and Building a Better Retirement

Podcast Transcript

Podcast: Dollars & Sense
Episode Date: April 12, 2026
Speakers: Joel Garris, CERTIFIED FINANCIAL PLANNER® Professional, Certified Financial Fiduciary™

00:00 Introduction: Taxes, HSAs, and Retirement Planning Overview

00:00 – Joel Garris, CF2™

The rising cost of health care is certainly a significant problem for pretty much all Americans these days.

And so we wanted to take a moment on the program and talk about an option that you may have available to you to combat that.

What we’re going to be talking about is a health savings account.

These are some pretty powerful vehicles that, fortunately more and more people are starting to get familiar with.

They’ve been around since 2003, so one of those things where you would have thought more people would have had these types of accounts, because they can be very, very powerful.

So we’re going to talk about those on this week’s program.

And then we thought we would talk about some things that have changed when it comes to retirement, and in particular, planning for it.

So if you’re nearing retirement, or maybe you’re even in retirement, there’s some things here that you probably want to know when it comes to your retirement and making sure you have the most effective plan for it.

Of course, this is April 12th, the live air date of the program.

And so that means the taxes are due this coming Wednesday at the office as we go through every year, as we have been for now probably 25 years, I think.

Our tax preparation service is reserved exclusively for our clients, where we get to kind of overlay that overall financial plan with a very detailed analysis of your taxes, which obviously is valuable because I think taxes are probably the number one expense that people spend money on, followed immediately by that healthcare expense that we were talking about earlier.

So we’re going to talk a little bit about if you owe money, what does that mean, what you should do to maybe better prepare.

So all of that is coming up on this week’s program here on Dollars & Sense, where we help you make cents out of all of life’s decisions involving your dollars.

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02:00 Why You Might Owe Taxes and What It Means

00:00 – Joel Garris, CF2™

What does that mean? What you should do to maybe better prepare?

So all of that is coming up on this week’s program here on Dollars & Sense, where we help you make cents out of all of life’s decisions involving your dollars was one of Central Florida’s longest-running radio programs, also a top 25 financial planning podcast.

So make sure you subscribe to us on your favorite platform of choice Any trouble finding us, you can go to our website at nelsonfinancialplanning.com There you will find some icons Click on them They will get you immediately connected to our channel.

Once you’re there, then you can hit that subscribe button so you do not have to do that process again Also, while you’re on the website, if you’re curious o how we might be able to help you make better decisions with your money and your retirement, you can fill out that contact us form and the office will give you a call this week to schedule something on the calendar to get that conversation all organized.

My name, of course, is Joel Garris. I’m A CERTIFIED FINANCIAL PLANNER®, Certified Financial Fiduciary™ at Nelson Financial Planning.

We got a team of great folks who also happen to be Certified Financial Fiduciaries™ as well, standing ready to help you make better decisions with your finances.

So hopefully come Wednesday, April 15th, given the air date, original air date of this program is April 12th, you are not having to write too big of a check to cover your taxes.

Obviously, if you do, you’re not alone. I think when we think about the number of people that owe versus getting refunds, it’s usually a somewhat even split. And there’s some things though that you need to be thinking about in terms of strategies to help address that.

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04:00 Understanding the IRS Pay-As-You-Go System

04:00 – Joel Garris, CF2™

So we’ll start with a big picture, and this is a piece that I think people kind of miss when it comes to their taxes is that the IRS and the payment of your taxes is sort of on a pay-as-you-go system. So what that means is as you earn the income, you’re expected to pay the taxes on it throughout the course of the year. If you don’t, then you could have some interest and penalties and things like that then get added on top of your regular tax bill.

So whether it’s through payroll withholding on a regular paycheck, W-2, whether it’s doing quarterly payments, if you are self-employed where you’re putting money in every quarter to help offset the tax liability associated with that income, or if you are retired and maybe you’re taking tax withholding from your retirement distributions, or in the case of Social Security, which by the way is still very much taxable under the same parameters under which it’s always been, then you might want to do some tax withholding on your social security.

And because the notion is that to make sure that you’re kind of paying as you go. Otherwise, not only will you owe taxes, but you’ll also owe interest and penalties on that.

And as interest rates go, and obviously they’re higher than they were a few years ago, then those interest and penalties can start to be a whole lot more than what you might be originally expecting.

So the strategy to combat this starts with reviewing your tax return. Don’t just take the tax return and stick it in a file cabinet or throw it up in a cloud, never to be viewed again. That tax return is the single most important document when it comes to your overall finances and achieving the right efficiency when it comes to your money that’s coming in and going out.

And so make sure that you really take a look at that tax return and see, okay, did I owe money or did I get a refund? If I owed money, then I also then have to pay some interest and penalties and those kinds of things.

So if you did, then you certainly want to pay particular attention to some of these next steps that we’re going to go through.

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06:15 Adjusting Tax Withholding (W-4 Strategies Explained)

06:15 – Joel Garris, CF2™

So if you are still working and have a W-2, easiest way to do to adjust your tax withholding is just adjust your tax withholding on your paycheck.

You do that by submitting a new, what is known as a form W-4 back to your employer and then that way they will start to withhold more taxes for that particular income.

Now, the key piece there is that the lower the number, the more that increases the tax withholding. So too often we’ve heard people say, well, I moved it from, I was single and one, and I moved it to single and three.

That should help, right?

No, it’s actually the other way around.

The lower that number of dependents are, then the more the tax that’s going to be withheld. So understand that there’s a little bit of an inverse relationship on that. So you certainly want to check the tax withholding on your W-2.

And then to the extent that you do have income, like self-employment income, or maybe it’s investment income, things like dividends, capital gains, you can’t easily withhold taxes on those. So in that case, you probably want to get into the habit of paying on a quarterly basis.

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07:30 Quarterly Estimated Payments for Investment and Self-Employment Income

07:30 – Joel Garris, CF2™

So those estimated payments are designed to be calculated based on the tax liability from the previous year and sort of put you in a safe harbor where if you make your estimated payments, then you do not have to worry about any type of interest or penalty, even if you owe more next year.

So those are the things to make sure that you are paying attention to. I would say, I would caution one thing, that if you’re an investor that’s got a significant portion on the after-tax side of things, so think outside of a retirement account or outside of IRAs or 401ks or those kinds of things.

And that’s generating a chunk of dividends or capital gains. You may want to hold off on paying the full amount of the estimated payments as they are currently calculated because what we’re seeing is that after you have had a number of years in the market that have been generally very positive, then those dividends, those capital gains continue to rise and thereby increase the quarterly payments.

I think one of the things that you could do is to sort of wait until the end of the year to get a little bit better perspective on how much you might have in dividends and capital gains.

Because those, as you might well imagine, or the amount of those is directly dependent on sort of how well the market did during the year. Obviously, in April, it’s a little hard to predict where the market’s actually going to wind up for the year. So those are some of the things that you want to look at, particularly if you’re paying those quarterly estimates, and those quarterly estimates are triggered based on some dividends, capital gains, things like that happened the prior year.

As we said earlier, Social Security, guess what, is still taxable in the same calculation as it’s always been.

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09:15 Social Security Taxation and Common Mistakes

09:15 – Joel Garris, CF2™

The only offset to that is a new senior deduction. If you are over age 65, it’s a $6,000 per person, but the calculation is still the same.

So if you are starting Social Security or are collecting Social Security, you’re not doing any tax withholding on it, and all of a sudden you’re finding I owe a bunch of money, you may need to go back to Social Security and ultimately take a look at that.

So those are some of the things to be thinking about if you wind up owing money on your taxes and you have to write a big check on Wednesday or see a big chunk of money pulled out of the account.

Those are some of the things that you can look at to try and make sure that you don’t have the same surprise next year. With that, we’re going to take a break here on Dollars & Sense with Joel Garris of Nelson Financial Planning. Welcome back into the program.

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10:15 Rising Healthcare Costs and Financial Planning Impacts

10:15 – Joel Garris, CF2™

We’re talking a little bit in this segment about the rising cost of healthcare.

Now that’s not exactly a newsflash in today’s world, but one of the things that we wanted to do was to kind of dig in a little bit on one of the ways to combat that rising cost of healthcare.

10:30 What Is a Health Savings Account (HSA)?

10:30 – Joel Garris, CF2™

And that is through the vehicle known as a health savings account. Now, these things don’t get nearly enough credit in kind of overall financial planning.

And I think the misconception is, oh, that’s just an account that’s tied to my health insurance. Or even worse, people think that a health savings account is similar to a flex spending account where I’ve got to use all of those dollars out of that account. Otherwise, I lose them.

Folks, to be perfectly clear, that is not true for a health savings account.

That is only true for a flex spending type of an account.

And so because of that, then that gives the health savings account a much more interesting potential usage on what that can amount to for your more long-range financial planning, because it certainly can become a very valuable and retirement and tax planning tool because it is the only account, the only one in the tax code, that has the triple tax advantage that a health savings account has.

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11:45 The Triple Tax Advantage Explained

First of all, the contributions, when you’re putting that in, they go in on a pre-tax basis. So you get the tax deduction for putting money into a health savings account.

The growth inside the account is going to be tax-free, tax-deferred, meaning you don’t have to pay taxes along the way as that amount of money sits there and grows and compounds.

And then, and here’s the triple tax advantage part of it. When you take the money out of a health savings account, the withdrawals are tax-free when you’re using them for a qualified medical expense.

Folks, no other account, no other type of option out there allows you all three of those tax-advantaged characteristics.

Now, in order to have a health savings account, there is some requirement. You can’t just randomly go out and get a health savings account. It has to be opened in conjunction, in conjunction with a high deductible health plan. There has to be a, you have to be paying on a qualified high deductible health plan that allows for that health savings account option.

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13:00 HSA Eligibility and High Deductible Health Plans

13:00 – Joel Garris, CF2™

But more and more, because of the cost of just regular health insurance, more and more people are going to that high deductible plan.

And because of that, if it’s a high deductible plan, then the cost is in theory, lower than kind of a plan that would just have a small deductible. You pay a lot when the deductible gets smaller, whether that’s health insurance or homeowner’s insurance or car insurance or any insurance.

And so the health savings account, only an option when used for in conjunction with a qualified high deductible health plan.

And health savings accounts have been around for a while. They started in 2003. So they’ve been around for over 20 years. And they were originally designed to sort of help people manage their out-of-pocket health care costs.

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14:00 How HSAs Evolved Into a Retirement Planning Tool

14:00 – Joel Garris, CF2™

But over the course of the 20 years, as health care costs have risen, people have been living longer.

HSAs have sort of evolved from a spending account to the potential of having very long-term, significant financial implications, more as an overall planning tool for your future.

So today, 10s of millions of HSA accounts out there holding hundreds of billions of dollars.

The largest balances are obviously held by people between the ages of 60 and 64. And what’s interesting is that a lot of folks now are not just sort of using or putting money in, but they’re also preserving and saving money in them and increasingly investing them.

And we think that’s a very good trend as it relates to these accounts because they really can become a pretty significant source of generating funding in retirement. Because with the HSA, I mean, there’s some unique characteristics besides that whole triple tax deferral, which is unique in and of itself, where you get to put the money in and get a tax deduction, the money grows on a tax-deferred basis.

And then when you use it for qualified medical expenses, you don’t have to pay any taxes on any of the original contribution or the growth. But also, a health savings account has no required distribution age.

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15:30 Advanced HSA Strategies and Long-Term Benefits

15:30 – Joel Garris, CF2™

You can certainly leave the money in there. It’s not a use it or lose it. And the other kind of interesting piece is that as opposed to like a flex spending plan, where you’ve got to use the money before the end of the year.

It has to be used on money that you spent in that current year. With an HSA, you can literally use that to reimburse yourself for old medical expenses. years or even decades later after you incurred those expenses. And then with an HSA, after age 65, those rules for distribution become even more flexible.

And so if you’re paying those out of those medical expenses out of your pocket today, you certainly want to hold on to those receipts so that you can reimburse yourself in the future tax-free whenever you may want.

So, an HSA can certainly function like a tax-free emergency fund, it can be like a healthcare reserve. and in its own right, a significant option when it comes to tax planning in retirement. So here are some of the other key things you need to know about a health savings account. Before the age of 65, there are some significant guardrails.

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16:45 HSA Rules Before Age 65

16:45 – Joel Garris, CF2™

First, obviously, you must be qualified by that qualifying high deductible health plan. Number 2, there is a limit in terms of how much you can put in these.

For 2026, if you’re single, that’s $4,400. For a family, that’s $8,750. That’s more than what you can put into an IRA or a Roth. And then if you’re over 50, you can put an extra $1,000 in on top of that.

So some decent contribution levels that you can make in that. And then to the extent that you use it before age 65 for non-medical expenses, here’s where you want to be careful, right?

If you’re under the age of 65, you decide that I’m going to use your health savings account for something that is non-medical, well, then you are disincentivized for doing that because that comes with a 20% penalty plus the distribution all becomes taxable. So you don’t really want to just use it willy-nilly.

You certainly want to use it for those medical expenses.

And then as you get to 65, that’s really kind of a major turning point when it comes to health savings account, because the one negative when you get to 65 is you cannot contribute to a health savings account once you enroll in Medicare.

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18:00 HSA Changes After Age 65 and Medicare Considerations

18:00 – Joel Garris, CF2™

Once you’re on Medicare, you can’t contribute to a health savings account.

But after age 65, that 20% penalty for non-medical expenses disappears, and those withdrawals for non-medical expenses are allowed and are simply taxed like regular IRA distributions.

So that means that the HSA essentially gains IRA-like flexibility, but still keeps the tax-free status when you take money out to cover medical expenses.

And because there’s no time frame on when you can reimburse yourself from a health savings account, my goodness, that really does give you an awful lot of options. So some really some smart strategies when we think about health savings account. because to really try, assuming that you’re eligible to have one with your qualified high deductible insurance plan, you really want to think about trying to maximize that out and fundamentally not necessarily look to spend the balance out.

If you can continue to kind of roll some of that forward to achieve compounding, and then a lot of these HSAs do have investment options where you can invest that and then use that money to continue to grow.

And certainly, these health savings accounts are some pretty powerful vehicles when it comes to planning for retirement. So certainly something to think about and be aware of on those nuances with those accounts.

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19:30 Using HSAs for Retirement Income and Flexibility

19:30 – Joel Garris, CF2™

With that, we’re going to take a break. This is Joel Garris of Nelson Financial Planning here on Dollars & Sense. You don’t, of course, need me to tell you this, but we live in an ever-changing society.

And change affects everything and all of us in a variety of different ways.

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20:00 Why Retirement Has Fundamentally Changed

20:00 – Joel Garris, CF2™

And certainly there has been a lot of societal changes that directly impact retirement as well. And so we want to talk about some of those that are the most impactful in this segment of the program.

And then sort of what you need to do now to best prepare for that. Interestingly, market volatility in retirement may not be your biggest risk as we work through this list, because the days of your parents’ retirement are behind us, right?

If you think about the generations before that retired and they collected a pension and then they got some Social Security, and they didn’t live until their 90s. And so that version of retirement largely doesn’t exist anymore, right?

Pensions are kind of gone.

Social Security is somewhat limited. And certainly people are living much, much longer.

So when we think about planning for retirement, relying on some of those old assumptions can really put investors and retirees, it’s a serious, serious risk. So we want to talk through six different ways that things have changed in today’s world, why they matter, and sort of most importantly, how you can be better prepared to combat these real changes that have happened that ultimately impact your retirement.

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21:30 Longevity Risk and 30–40 Year Retirement Planning

21:30 – Joel Garris, CF2™

And the biggest, of course, has to do with longevity, right?

The traditional retirement lasting 20 to 25 years, that’s generally not the case anymore. Think 30 to 40 years.

And so when we think about that long of a period of time, that matters a lot to investors because that significantly increases the risk of outliving your money, right?

It’s like at 85, if you run out of money, you’re probably not going to have the opportunity to go back and work in a normal job, let alone have the energy to do that.

And so that longevity risk becomes a major risk, if you will, on how retirement ultimately plays out. And so that longer retirement changes everything. It changes the savings rates, it changes the withdrawal rates, it changes the the investment allocation and certainly changes the tax planning as well.

So you really want to make sure that you are building retirement strategies that can grow and adjust over time. The notion of kind of setting things and forgetting them and not rebalancing or not having the flexibility to adjust spending at different points in time, that’s not really going to work as effectively as if you build a plan that has some flexibility and some adaptability to it.

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23:00 Inflation and Its Impact on Retirees

23:00 – Joel Garris, CF2™

The other thing, of course, is inflation. We’ve come through a period of probably 10 or 15 years where inflation was relatively low for many, many years. And didn’t necessarily, I guess, maybe notice it was always there, but relatively low.

There were a few years, probably several years ago where the cost of living adjustment on Social Security was 0 because there wasn’t really hardly any inflation.

Fast forward to post-COVID days, and there has been a lot. And lest we forget, yeah, you can get inflation back down, but the cumulative impact of inflation still remains.

Once the price of something goes up due to inflation, it doesn’t just kind of trickle back down the way that you would normally expect. So inflation being a cumulative impact on the cost of goods and services, that can really then, particularly based on the past several years, really make inflation a much bigger part of the equation.

And where that inflation is probably greatest is actually in the areas that impact retirees, often much more. Things like health care, things like insurance, all of that has seen significantly greater increases versus, say, clothing where you don’t necessarily need to be getting a bunch of clothing when you’re over the age of 65.

Maybe you still do, but the reality is that more clothing is spent in younger ages than in older ages. And that, for example, hasn’t had a very significant inflation.

But meanwhile, health insurance and healthcare, which you typically use when you are older, that has had a much more significant impact of inflation. So the impact of inflation is hitting disproportionately among those that are of that retiree age.

And so it’s important to understand inflation that’s going to erode my purchasing power or the ability of my dollars to buy the same things. So you’ve got to still make sure that your investments have some portion that’s designed for long-term growth.

You’ve got to be careful about being being have an over a reliance or an over allocation to sort of fixed or non-income adjusted or non-inflation adjusted types of investments.

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25:30 Why Conservative Portfolios May Fall Short

25:30 – Joel Garris, CF2™

So important to kind of keep that in mind. And then that sort of dovetails into the next concept, which is that conservative portfolios alone are not going to be enough to get you through what retirement looks like in today’s changing world.

I think far too often, many folks, and this school of thought still prevails significantly out there on the internet and whatnot, is that once you retire, you’ve got to move everything into or almost everything into safe investments, things like bonds, things like CDs, things like fixed income types of investments.

But today’s environment is different. First of all, yields are relatively lower, the longer retirements, higher inflation.

So a bond-heavy portfolio, while that may be more conservative, is not going to generate enough income or growth to meet that 30, 40-year perspective.

So the key piece there is that growth in and of itself of your underlying investment portfolio is important regardless of how old you are. Still very much a necessity in retirement.

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26:45 Time Horizon vs. Age in Investment Strategy

26:45 – Joel Garris, CF2™

And so to make sure that you are looking at that investment allocation and aligning that with sort of more of a time horizon, not necessarily your age. And I think far too often

The age formula, particularly like with all these target date funds, the age formula is too simplistic. It shifts things much more conservatively than necessary. Rather than rely on age or a target year, you’ve really got to think about that time horizon.

If I’m 65, and for example, if my parents are still living, then okay, you’ve got some good genes going for you. You got to really start to be thinking about more of a 30 to 40 year retirement.

And then that certainly does have an impact on how your portfolio ultimately is invested. Healthcare, long-term cost, we talked about those earlier in the program. We were talking about health savings account.

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27:45 Healthcare Costs and Medicare Considerations

27:45 – Joel Garris, CF2™

Obviously, big expenses. They hit retirees more than any other age group because that’s the group that’s more likely to have healthcare costs.

And ultimately, to make sure that you understand what Medicare covers, what it does not, what’s involved in that, and most importantly, build flexibility. We’ve got a couple more thoughts on this topic that we want to share.

So we’re going to have to take a break and then we come back from the break.

We’re going to continue this conversation with some of the things that have changed as it relates to retirement planning and how you need to be addressing those as we continue here on Dollars & Sense with Joel Garris of Nelson Financial Planning.

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28:30 Retirement as a Transition, Not a Hard Stop

28:30 – Joel Garris, CF2™

Continuing the conversation of some of the things that have changed as it relates to retirement and how you want to sort of incorporate these changes into your overall planning, you don’t need me to tell you that we live in an ever-evolving, ever-changing society.

Well, guess what? Those changes are impacting people’s ability to plan for retirement. Things like longevity risk is in fact even more significant than market risk.

Because if you’re planning a 20-year retirement and you live 30 or 40 years, then you have not planned appropriately. The notion that you have to have a time horizon-based investment plan rather than just an age-based one, because it’s more important to sort of forget the age.

Oh, I turned 65, I’m on Medicare, life is great, I’m gonna retire. Yeah, that’s good, but it’s not that doesn’t necessarily mean as much as it did.

More important to think about that time horizon, because what that’s going to do then is drive more of your investment allocation to have growth, to be able to offset the impact of inflation, which was for a period of time relatively low. But of course, over the past few years, it’s increased quite a bit.

And inflation is cumulative. So the inflation increases of several years ago, immediately after COVID, those are still with us. Those are still in the price of goods.

They don’t go away just because you wind up, oh, inflation is lower but the impact of that high inflation from a few years ago is still in the soup, so to speak. So you’ve got to be careful with understanding kind of what that impact of inflation is going to be and then how that ultimately drives your investments.

Why then you need to be very careful about following some of the traditional models that say, oh, I get to retirement, I got to shift to a conservative portfolio. The reality is your portfolio certainly needs growth to offset the longevity that comes with retirement in today’s world.

And then Social Security, obviously a lot of conversation and concern about that. The reality is never actually meant to cover your retirement needs. It was specifically designed to cover just a portion.

And ultimately, I think this is where sometimes confusion or poor choices winds up affecting the total lifetime income, where you’ve got issues with if you’re too early and haven’t saved enough money, then that’s certainly one issue.

The cost of living adjustments for Social Security don’t typically reflect the inflation that retirees see because they consume a different sort of cross-section of goods and services than the overall population.

So you want to make sure that you’re using Social Security as a foundation, certainly a nice piece of income that’s going to come in, but you need to make sure that it also works in light of other income sources and other assets that you have. And then lastly, we would also point out that retirement is no longer sort of a clean stop for many.

It’s more of a transition. And I think this has to relate back to sort of the longevity issue that is part of retirement today, where often we see people not necessarily hard stop retiring, but really looking at things from sort of a transition point of view.

So maybe that’s doing some part-time work, Maybe that’s doing some consulting. Maybe that’s getting involved in a charity. Maybe that’s caregiving, which in and of itself is a significant role.

And so there’s more sort of emotional or lifestyle-driven types of choices.

We talk a lot about those types of things on the program and to kind of be aware that the need to stay active, the need to stay involved, to keep the mind active is just as important as keeping yourself physically active as well.

So I think as we reflect on some of these changes and think about how that has impacted retirement planning in the 25 plus years that I’ve been doing this, I think it’s really more about, it no longer is like a hard stop. I think it’s more about sort of there being an evolving period of time, an evolving phase of life, if you will,

And as we said, more and more people aren’t, the biggest risk isn’t necessarily market volatility. It’s longevity risk. It’s relying on those old assumptions of prior generations when it comes to planning the future.

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33:30 Flexibility vs. Perfect Forecasting in Retirement Planning

33:30 – Joel Garris, CF2™

And you want to be careful about doing that. Because the most successful retirees that we see, they’ve got options, they’ve got flexibility, sort of multiple income sources, ongoing planning and adjustments.

And I think that’s kind of one of the key pieces is that to have a successful retirement more and more in today’s world, you need to have flexibility. You need to have adaptability.

And that is far more important than trying to achieve some perfect forecast.

You know, we’ve seen certainly, I mean, these computer programs have been around forever, probably even more ubiquitous now than they ever have been, where, you know, you put in all this input data, and we’ve got the program at the office as well. But every time I kind of sit down and go through that with a client.

It’s like, okay, we put in all this information and here’s all these projections and all of that.

And, that’s all fine and dandy and a good starting point.

But it’s, the value of that and having as perfect of a forecast as you can possibly have with all of the data inputted, it misses the key ingredient of when it comes to retirement, when it comes to the markets, when it comes to life itself filled with things that vary from one season to the other.

More important to have flexibility and adaptability when it comes to navigating through retirement in as successful of a fashion as possible. So today’s show is pretty full, as always, all about preparing for your best possible retirement with a little bit of a tax focus.

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35:15 Final Thoughts: Tax Planning, HSAs, and Building a Better Retirement

35:15 – Joel Garris, CF2™

So we kicked it off talking about how to avoid owing taxes next year. Folks, I can’t emphasize this enough.

If you are finding that you owe a bunch of money on the tax deadline coming up this week, you really want to take a moment and look at your tax return and go back through it and see what’s causing that.

Did you start Social Security or are you collecting Social Security and you’re looking at it and you’re saying, wait a minute, I thought Social Security was going to be tax-free.

No, that is not the case.

Yes, there is an additional deduction, but that additional deduction only goes towards a very small portion of Social Security for most people. Social Security, the calculation of it as part of your income, still very much the same as what it has always been for the past 30, 40 years. So what that means then is that if you’re not withholding taxes on your Social Security, that could be the culprit. for why you owe a bunch of money on Wednesday, April 15th for this year’s tax filing deadline.

Also important to take a look if you’re still working, okay, if you’ve got a W-2. Is that the right amount of tax withholding or do you need to adjust that?

Remember, bring the number down, not up, if you want to increase your tax withholding. Crucially important there as well. And then if you are taking retirement distributions, make sure you’re doing some level of tax withholding on that.

Because remember, the tax system here in the US is a pay-as-you-go type of system.

The IRS, or United States Treasury more specifically, they want to be collecting that tax revenue along the way as you are earning the money. And if you don’t do it that way, then there’s interest and penalty that comes into play.

So make sure you’re taking a look at those kinds of things.

And then if you’ve got income where the tax withholding isn’t automatic, so things like maybe it’s consulting income, maybe it’s dividends, maybe it’s capital gains, those types of things, then that gets you into the world of having to pay estimated payments every quarter to help make sure that is covered.

So an important part of overall retirement planning, but not just for retirees, for people that are still working as well.

If you owed money, you certainly want to take a moment and figure out why and what was the cause of that and then adjust accordingly. Don’t just take that tax return and throw it in a file cabinet. Use that as a document to help you review, to put your yourself in better financial shape come next April 15th.

And then if you’ve got a high deductible plan, I can’t emphasize this enough, make sure you’re fully funding that health savings account. It’s the only account that where you get to put the money in and save on your taxes. The money grows on a tax-free basis.

And then when you use it for medical expenses, it is tax-free as well. So if you’ve got a high deductible plan, make sure you check out that health savings account.

With that, we’re going to wrap it on up and get on out of here. If you’re interested Now we can help you.

Visit our website at nelsonfinancialplanning.com to schedule an absolutely free conversation.

Thanks for listening to this week’s edition of Dollars & Sense with Joel Garris of Nelson Financial Planning.

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Next Steps

If you’d like help reviewing your financial plan, investment strategy, or retirement readiness, explore the resources available through Nelson Financial Planning or schedule a consultation to discuss your goals.