Nobody wants to reach retirement and find that they have underprepared. Of course, the best way to prevent against this fate is by starting the retirement planning process sooner rather than later. Even those who engage in retirement planning can find that they haven’t quite considered everything, though—and that unwelcome realization can point toward some sacrifices and tough decisions.
The best way to avoid an incomplete retirement plan is to work closely with a financial planner, who can ensure that you are covering all your bases. Additionally, it’s wise to have a good sense of the scope of retirement planning, and a fair understanding of what your retirement plan should address.
What Should Be Included in Your Retirement Plan?
Some key components of a sound retirement plan include:
Your retirement could span decades, and during that time you’ll need to have reliable streams of income. Make sure you have a good sense of where income will come from, and that you account for inflation. Ideally, your retirement planning will also address your surviving spouse and protect you in the event of real longevity. Basically, you want income planning that you won’t outlive.
Once you handle your income planning, you should have assets left for investment. Here it’s important to talk with your advisor about things like risk assessment, and how it should be adjusted as you near retirement age; volatility control; and ways to reduce portfolio fees.
Retirement planning also needs to take taxation into account—with the goal of keeping your tax liabilities as light as possible. IRA planning is critical here. You can also work with your financial advisor to strategize regarding tax deferment, and to adequately assess the taxable nature of any current assets or holdings.
Health Care Planning
Healthcare can be pricey, especially as we age—and your retirement plan should accommodate that. Talk with your advisor about what you can expect from Medicare, and augment your Medicare planning with other options for long-term care. For some, it may even make sense to consider disability insurance, which can keep you from losing your income should you become disabled on the job—something that could obviously complicate your retirement plans.
You may also wish to invest funds from your retirement accounts in a charity or non-profit of your choice—but what’s the best way to do so? In terms of minimizing taxes and maximizing your contribution amount, it may be prudent to direct those funds to be donated only after your death. This is something you can speak more about with your financial planner.
Finally, consider that moving into retirement with debts—whether a mortgage or high credit card debts—can eat into your income streams. Ideally, you’ll have a plan to pay off your debts before you retire—something your financial planner can help you develop.
Make Sure Your Retirement Plan is Complete
As you think ahead to your retirement years, there are many factors to weigh and contingencies to consider. Again, the best way to ensure a complete, effective retirement plan is to work with a financial advisor. To speak with us about retirement planning at Stonepath Wealth Management, reach out to us at your convenience.