Financial Planning Does Not End with Retirement

By on July 25, 2018

Financial planning does not end with when you leave the workforce. Now that you have built up this nice retirement nest egg, it is time to make adjustments to your financial plan which fits your lifestyle and fulfills your needs as a retiree. Sit and discuss these changes with your trusted financial planner to protect your wealth so it can support you in the long-term.

5 Steps to Reviewing Financial Plans in Retirement

1. Polish up your Estate Plans

You may not want to face facts, but you’re not getting any younger and you should have wills and estate plans in place. If you have any money to pass onto dependents (spouses, children, grandchildren, etc.), it may require more sophisticated planning techniques to avoid heavy tax burdens. At least some plan will give you a goal to make smarter financial decisions for the sake of your loved ones futures.

2. Appraise ALL Retirement Income Streams

Most of your financial plans are now shifting from accumulating money towards a proper distribution schedule which will last for the rest of your life. But do you know how much money you have at your disposal and when is the right time to use it? It can be very tricky to balance pension plan withdraws with social security and investment income against inflation and tax liabilities.

While it can be tempting to dig into that nest egg for that trip to Cancun you’ve always wanted or extending your ensuite just after you retire, you could end up subject to heavy taxes or worse, not having enough to cover expenses or medical bills when you’re 85.  Time to reassess your plan for taking money out of your 401k each year, determine how long you can afford to defer drawing on Social Security benefits to get the most in return, and start coming up with other ways to generate income.

Tapping into Retirement Accounts
Your plan should answer these two questions: How much are you going to withdraw annually? And from which accounts? Based on what you saved, retirees will set a schedule to withdraw a percentage from their account each year. Some theories recommend 6 to 8 percent or more, however, in recent years a more conservative approach has become common. Now, withdrawal rates range from 3 to 6 percent in an effort to protect you, as much as possible, from running out of money.

You will also want to review your plan with a trusted tax expert to ensure you withdraw from the right accounts, at the right time to limit tax liability. Then, speak with your financial advisor to ensure you have enough in cash and reserves to withstand a market downturn; that way you don’t rely on your withdraws for emergencies.

Drawing Social Security Benefits
There is no tried and true strategy for drawing on your Social Security benefits. It is not always best to start drawing your benefits immediately after retirement. Instead, your decision will be based on how much you paid into the system, your age, taxes and more. Maximizing your benefits may require the help of a financial professional with the expertise and knowledge of how the system works and which timeline will work for you.

Alternative Income
Most retirees expect to rely on their pensions and savings for income over the next 30 plus years, however, you may want to start searching for investments which will provide you with continuous income, just like you had when you were employed. Some people sell their primary residence, others purchase property to rent out, and some start businesses of their own. The extra income can ensure you enjoy the lifestyle you want or can survive inflation, rising healthcare costs or a long life expectancy.

3. Review your Post-Retirement Investment Strategy

Retirement is not the time to abandon your stock investments, but it is the time to review and re-balance your portfolio according to your current risk tolerance. When you were trying to accumulate savings you may have chosen high risk, high return investments. Now that you are in a distribution phase you might consider investing more conservatively. You don’t have to go heavy on the cash and bonds, but consider dialing down risk after retirement.

4. Review your Insurance Protections

You should annually review all of your insurance protections to ensure each policy is up to date. After retirement these reviews are especially important for health and life insurance coverage. Many term life insurance policies are reaching recovery and you might need long-term care coverage.

Health insurance, private savings, and Long Term Care Insurance can be used to pay medical bills, pay for elderly care, nursing homes and more. A financial advisor can help you make smart choices given your finances and estate plans.

5. Cut your Spending to Help Your Savings Last Longer

You can’t spend money you don’t have, even if you know it’s coming in at the next annual withdraw. Monitor your budget and cut your expenses to keep from spending money you don’t have access to. The money you save at the end of each year can be held in cash reserves, used for emergencies to cover account shortfalls, re invested or put towards a special purchase.

Although your lifestyle may change when you retire, the fundamentals of personal finance do not. You will still need to prepare a budget, control your expenses and monitor the rate at which you are using up your retirement savings. Never forget that while retirement is the end of your working life, it is not the end of your financial life. Now more than ever you need to reassess the strength of your financial safety net for the next 30 plus years.

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About Harold Goldman

I am the founder of FinancialSafetyNet.org, and a Retirement Planning and Long-Term Care specialist. I am also the President of Emes Insurance Services, Inc., a Murrieta based insurance agency designed to help people with Retirement Planning and funding for College. I believe in educating my clients to become financially competent in an effort to develop plans for guaranteed income, protection against loss and tax-advantaged growth. To contact me Call (844)-376-2265

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