Retirement planning is like building a house. You don’t want to order out all your materials until you have a blueprint. And, you don’t begin the blueprint until you have a vision (artist’s rendering) of what you want the finished product to look like.
And, of course, there’s the budget.
What do you want your retirement to look like? What will it take to do it? How close are you to realizing that goal? And, how did you arrive at that conclusion?
Tough questions, yes. But, as someone once said to me: if you think education is expensive, try ignorance.
Okay, here are some tips:
- Talk with your financial advisor. Your financial advisor has been through this many times before. You haven’t been through it yet. Experience and education do make a difference. The biggest concern is finding a good one. These days it seems everyone is calling him/herself a financial planner. Check credentials and experience. Are they truly independent planners or simply disguised brokers? Check the CFP Board’s website! Remember, too, you want to find a planner that best fits your needs. It’s not like finding someone you’ll see once every five years; it’s almost a marriage. A good advisor will be screening you, too.
- Make your Social Security decision. This isn’t done in a vacuum. This is an integral component of your total financial plan; and, because these benefits can be taxable, how other assets are arranged can affect the degree to which these benefits are taxed, or not at all. There are a lot of myths surrounding claiming options. Don’t be too quick to choose an option simply because someone you know made a (possibly bad) decision.
- Review how your current assets are arranged now. Has your current arrangement been ‘stress-tested’ for a down market? Or, is the market doing it for you for the first time now? Think about this: An asset that drops from 100 to 80 has experienced a 20% loss; but, for that asset to get back from 80 to 100 requires a 25% gain…. just to get back to even. You don’t want to be drawing down on retirement money when markets turn against you. Murphy’s Law does happen.
- How much income will you need in retirement? Don’t forget inflation (how can we?) and tax law changes (inevitable). Have you ever created a projection and done a probability analysis (inflation, taxes, and markets never seem to move in a straight line).
- Planning a major purchase? When should you do it – now or later? How will that purchase impact your lifestyle years from now if that same money had been redeployed? Maybe not at all… or, it might be regrettable later. Did you plan before or after you took action?
- Medicare decisions: Did you get your advice from Joe Namath or did you make a deep dive to find out where the money comes from to pay for all those ‘free’ benefits? Do you know when your enrollment period is?
- Are your assets properly placed and titled? Are your beneficiaries updated? Did you name a grandchild for your IRA in a will but name your spouse in the IRA document? It will go to your spouse. Do your will and trust contradict each other?
- Do you have updated estate documents? If you have moved to another state, you probably should have everything updated. Do you have a designated general power of attorney, a healthcare power of attorney, etc.
- Do you have a trust? A will is a public document that can be contested and takes affect only after your death. There are many kinds of trusts and may help saving taxes or simply help you maintain control. While living trusts generally don’t save on taxes, but they can be simple to set up and they do save a lot of headaches for your heirs by avoiding probate.
- Do you have all your documents in one place? Is it fireproof, earthquake proof, flood proof? You might consider digitizing them and storing them in an independent, secure, vault. Documents such as employer plans, health savings accounts, medical plans, etc., that may become harder to obtain once you leave your company.
These are just a few tips. Talk with your advisor. Don’t have one? Gee, I wonder who you could get…..
Jim
