Why Your Retirement Could Use Some 'Downhill Planning'

By Christian Cyr, CPA

When people arrive at retirement after decades of work, they often are ready to celebrate. Co-workers may even send them off with a champagne toast.

But perhaps those fledgling retirees should temper that celebration just a tad. Retirement may be an emotional victory, but it’s not necessarily a financial victory. For many people, it’s the most difficult phase of their financial life.

That simple fact doesn’t always get acknowledged in the world of financial professionals, where the focus is on accumulating a nest egg and where advisors often push investment products that are more favorable to them than to their clients.

Less effort goes into positioning retirees to be set for the long haul – a retirement that could last two or three decades financed with savings that might not last anywhere near as long.

Making matters worse is a seismic shift that has quietly occurred over the last two years, arguably altering retirement outcomes for the foreseeable future. The direction of our country’s fiscal and policy actions has silently created what many consider a ticking tax time bomb underneath the feet of those who are retired or soon to be retired.  And not everyone is talking about it. 

At least, they aren’t talking about it until some retiree discovers what a tenuous situation they are in. That might begin to play out this way: A retired couple speaking with their financial professional expresses satisfaction that they saved $750,000. Their advisor politely informs them that their total is more like $500,000.

Initially, they are puzzled because that number in their portfolio balance sure looks like $750,000. But soon that situation becomes clear as the advisor points out that all of their money was saved through tax-deferred accounts, the keyword being “deferred.” Once they start withdrawing money from those accounts, the tax bill will come due.

That’s not what the couple anticipated during all those years they were saving and, metaphorically speaking, working their way up to the retirement mountain summit.

But getting to the top of the retirement mountain is the easy part. Navigating the downhill of retirement is where most of the risk happens and where real planning is required. I coined the phrase “Downhill Planning” years ago, which is the art of strategic financial planning and decision making in the retirement years to make your money last as long as possible, reduce taxes and maximize multi-generational wealth.

Here’s an example: One of the best tools in “Downhill Planning” these days is the Roth conversion, where you take money from your tax-deferred accounts and move the funds to a Roth IRA. You pay taxes when you make the conversion, but money in a Roth then grows tax-free.

The general concept is simple: pay some taxes now to avoid paying more taxes later. Right now, we have some of the lowest tax rates in history, which has plenty of people concerned – myself included – that at some point those tax rates are going to go up. 

But there’s another problem for retirees brewing that also makes the Roth conversion enticing. Because of the SECURE Act, beneficiaries are now forced to completely liquidate inherited retirement funds within 10 years of their parent’s death. In other words, they must withdraw the money from those retirement accounts, paying taxes as they go. 

This in many cases can cost families hundreds of thousands of dollars. But if the parent gets all of that money moved into a Roth before they die, their beneficiaries will pay no taxes.

Of course, a Roth conversion is just one example of how retirees can use “Downhill Planning” in retirement. A financial professional who focuses on this phase of life can help you with other strategies for navigating your way through it. 

With the right advice and planning, maybe you can fully enjoy that champagne toast after all.

About Christian Cyr, CPA

Christian Cyr, CPA, is the president and chief investment officer at Cyr Financial. He is a financial professional who can offer investment and insurance products and services.  A certified public accountant for over 20 years, Cyr helps clients understand the prudent approaches for investing, building wealth, and retiring comfortably. He spent over 15 years in the corporate world as a chief financial officer before founding a Registered Investment Advisory firm with expertise in retirement planning. Cyr speaks to audiences nationwide about investing and retirement, has been featured on Strategic Investor Radio, the National Association of Active Investment Managers' Shark Tank competition, and other media outlets. He has a master's in finance from the University of Illinois Chicago and a bachelor's in finance from Eastern Illinois University.