You spent years saving for retirement. Now you are here; the paycheck has stopped, and the job has changed. Instead of deciding how much to save, you have to decide where the money you spend each month should come from.
Maybe Social Security and a pension cover part of it. The rest may come from an IRA, an old 401(k), a Roth account, or investments you have owned for years. Which one you use matters. A withdrawal that looks perfectly reasonable by itself can change your tax bill, affect your Medicare premiums, or make the next decision harder.
Then there is the move to Florida. Your state tax picture changed. Your will or trust may have been written somewhere else. Beneficiary forms you filled out years ago may still be sitting on accounts you brought with you.
None of those decisions live by themselves. That is the planning problem.
Retirement Planning in The Villages
By the time you retire, the money is rarely in one place. You may have an IRA rolled over from an old 401(k), another account from a previous employer, a Roth you funded along the way, a taxable investment account, and cash at the bank.
Nothing is necessarily wrong with any of them. The problem is that saving and investing were only part of the job. Now you have to decide how all of those accounts should work together.
Which account should you use for spending? How much should you take? Should you leave the Roth alone? Does it make sense to realize gains in the taxable account? What happens to your taxes if you take more from the IRA? Could that additional income raise your Medicare premiums two years from now?
At the 2020 Census, the median resident was 73, and current Census Bureau estimates put more than 85 percent of residents at 65 or older (U.S. Census Bureau QuickFacts).
That is where Holland Capital starts.
Start with the Retirement Plan, Not the Portfolio
We do not start by changing investments. We start with the decisions the portfolio has to support.
How much do you need from your savings each year? How much is already covered by Social Security or a pension? What should come from an IRA, a taxable account, or a Roth? And what do those choices mean for your taxes and Medicare premiums?
Those answers come first because they determine what the portfolio needs to do.
A plan built while you were working was solving a different problem. You had a paycheck coming in and money going into your accounts. Now the direction has reversed. The paycheck has stopped, and the accounts have to help replace it.
That does not mean the investments you own are wrong. It means we need to know what you are asking them to do before deciding whether anything should change.
That is why we start with retirement planning before recommending changes to the portfolio.
RETIREMENT ENGINEERING™
The Order Matters
Five retirement decisions and why timing matters.
What Changes When You Move to Florida?
You may have spent years making financial decisions under the tax rules of New York, New Jersey, Ohio, or another state. Then you moved to Florida.
Part of the math changed with the move.
Florida has no personal income tax and no estate or inheritance tax. If you designed your withdrawal strategy or Roth conversion plan while you lived in a state that taxed your income, those decisions may warrant a second look.
But Florida did not make the federal tax system disappear. Federal income taxes still apply. The rules governing retirement accounts still apply. The income calculations that affect Medicare premiums still apply.
So the question is not simply whether Florida is a lower-tax state. The question is whether the plan you brought with you still makes sense now that Florida is home.
If the state you left has an income tax, there is another issue. It may want evidence that you actually left. Keeping your records consistent from the beginning can make that easier to establish.
Your Estate Documents and Beneficiary Forms
The will or trust in your filing cabinet may have been written years before you ever thought about moving to The Villages.
Moving to Florida does not automatically make it invalid. But it was written under another state’s laws and may not account for Florida’s rules, including its homestead protections. A Florida attorney should review it.
The same move is a good reason to pull out your beneficiary designations.
Those forms determine who receives retirement accounts, annuities, and life insurance, regardless of what your will says. If you filled them out years ago and have not looked at them since, you should know what they say.
We coordinate the financial side by making sure beneficiary designations, account titles, and the rest of the plan fit together through estate distribution planning. Your Florida attorney handles the legal documents themselves.
When Required Distributions Have Already Started
If required minimum distributions have already started, you no longer get to decide whether all of the money stays in the account. The IRS requires a minimum amount to come out each year.
RMDs generally begin at 73 under current law, and at 75 for people born in 1960 or later (IRS).
That takes away one choice. It does not take away the others.
You still have to decide where the rest of your spending comes from. You can take more from the IRA. You may be able to sell investments in a taxable account. You may have Roth money available. Those choices do not produce the same tax result.
And the effect may not show up only on this year’s tax return. Medicare uses income from two years earlier to determine income-related premium surcharges. A large withdrawal or taxable event this year can affect what you pay for Medicare two years from now.
That is why we care about the order of withdrawals, not just whether there is enough money available. We work through that order as part of a retirement withdrawal strategy.
There may still be other opportunities after RMDs begin. If you are 70½ or older and already give money to charity, a qualified charitable distribution may allow you to send that gift directly from your IRA. It can count toward your required distribution without being included in taxable income.
Roth conversions may also remain available. You have to take the required distribution first and cannot convert that amount, but that does not necessarily rule out converting additional money.
Whether any of this helps depends on your numbers. We run those numbers before deciding whether a Roth conversion belongs in the plan.
Homestead and Property Taxes Across Three Counties
You can move a few streets in The Villages and wind up in a different county.
The Villages stretches across Sumter, Lake, and Marion counties, and property tax rates can differ among them. Your county property appraiser also handles your homestead exemption.
If the home is your primary Florida residence, homestead can reduce its taxable value. Save Our Homes limits how quickly the assessed value of a homesteaded property can rise. If you previously owned another Florida homestead, portability may allow you to carry some of the accumulated assessment difference to the new home, subject to the applicable rules and deadlines.
It is easy to put all of that in the real estate bucket and forget about it.
We do not. What you spend on housing is part of what retirement costs. And what retirement costs helps determine how much income the rest of your assets need to produce.
Where the Portfolio Fits
Maybe you like the investments you already own. Maybe you have worked with the same advisor for years. Maybe you manage them yourself.
We do not assume they need to change.
First, we need to know what the portfolio is being asked to do.
Once we know how much you spend, what Social Security and pensions already cover, how much you need from your investments, and which accounts make the most sense to use, we have a much better idea of what the portfolio needs to accomplish.
That also helps us decide how it should be built and how much investment risk makes sense. If Social Security and a pension cover most of your spending, you are asking something very different of your investments than someone who depends on the portfolio for a large part of retirement income.
Where you hold an investment matters too. An IRA, a Roth account, and a taxable account do not receive the same tax treatment. The same investment can produce a different after-tax result depending on which account owns it.
That is where investment management enters the process.
We do not build the plan around the portfolio. We build the portfolio around the plan.
Working with Holland Capital
Holland Capital Management is an independent registered investment adviser and a fiduciary. M. Chad Holland, CFA, CFP® works directly with clients and is responsible for the planning and advice.
We call our planning process Retirement Engineering™.
The idea behind it is simple. Retirement decisions do not happen one at a time.
A withdrawal affects taxes. Taxes can affect Medicare premiums. The income you need affects what the portfolio has to produce. The accounts you own affect where that income can come from. Your estate plan affects what eventually happens to what is left.
So we start with the income you need, work through the tax consequences, make sure your accounts and estate plan line up, and use those decisions to determine what the portfolio needs to do.
By the time you retire, you may have accumulated an IRA from an old 401(k), another workplace plan, a Roth account, taxable investments, and cash at the bank. Each account may look perfectly fine on its own.
The question is whether anybody has put them together and decided how they should work now that you are retired.
That is the work.
The first conversation is free. If there is work worth doing after that, we define the scope and cost before you decide whether to move forward.
Our Florida office is in Winter Park, and we work with clients throughout Florida, including The Villages. Most meetings are by video or phone. When it makes sense to meet in person, we can meet by appointment at Premier Office Center in Wildwood, near Brownwood. Holland Capital does not maintain a branch office in The Villages.
We work with clients throughout Florida. You can see the other Florida communities we serve here.
If you want to see how our engagements are structured before talking to anyone, the what we do page explains them.
RETIREMENT ENGINEERING™
The Order Matters
Five retirement decisions and why timing matters.
Frequently Asked Questions
Do I Need a Financial Advisor Based in The Villages?
No. Your advisor does not have to be based in The Villages.
The more important question is whether your advisor understands what changed when you retired and moved to Florida. Federal retirement rules followed you here. Your state tax picture changed. Florida homestead rules now matter. Your estate documents may have been written somewhere else.
Those pieces need to fit together whether your advisor sits five miles away or five hundred.
I Still Own a Home in Another State. Can I Be a Florida Resident?
Yes. You can keep a second home after moving to Florida. But you can have only one domicile.
If the state you left has an income tax, it may look at where you spend your time, vote, register your vehicles, and maintain other ties when deciding whether you actually left. Florida homestead applies only to your primary Florida residence.
The important part is consistency. Your records should tell the same story about where home is.
My CPA and Attorney Are Still in the State I Left. Is That a Problem?
Not necessarily.
If your CPA already knows your tax history, there may be good reasons to keep that relationship.
Your estate documents are different because Florida law now matters. Have a Florida attorney review your will, trust, and other legal documents after the move.
Will Moving to Florida Lower My Tax Bill?
It can if you moved from a state with an income tax.
But you did not leave federal income taxes behind. Capital gains can still be taxable. Required distributions can still increase taxable income. Higher income can still affect Medicare premiums. And the home you bought in Florida comes with its own property tax bill.
We run the numbers using your actual income, accounts, and spending rather than assuming that moving to Florida automatically lowered your total tax bill.
What Should I Review Financially After Moving to The Villages?
Start with the plan you brought with you.
Look at where your income comes from and which accounts you expect to use for spending. Ask whether the tax assumptions behind those decisions still make sense now that you live in Florida.
Then look at the things that are easy to forget. Pull the beneficiary forms. Check the account titles. Have a Florida attorney review the estate documents. Make sure you have dealt with homestead and portability if they apply to you.
Then come back to the investments.
The question is not simply whether you own good investments. It is whether those investments are doing the job your retirement plan requires of them today.
Are You a Fee-Only Financial Advisor Near The Villages?
We offer financial planning on a fixed-fee basis, subject to the scope of the engagement. Investment management is offered on a fee basis, generally calculated as a percentage of the assets we manage. When providing financial planning and investment advisory services, we act as a fiduciary.
Photo: Connor J. Williams / Wikimedia Commons / CC BY 3.0, cropped.
