Financial needs in retirement will change.
You are planning for retirement.
You know you will not have a steady income from an employer.
Yet, you will still spend money.
You need to be able to pay bills and buy at least basic needs.
You are not sure just what those needs will look like.
According to a recent Kiplinger article titled “The 3 Spending Stages of Your Retirement,” you can probably break down your retirement spending into three stages.
What are they?
Stage one:
This timeline is from the day you retire to when you are age 75.
Typically spending in this stage will involve hobbies and travel, as well as daily expenses.
These activities tend to drive your costs up.
On average, you should plan for your cost of living to increase by 4 percent per year.
Remember, it is better to prepare for an increase in spending and have money left over than to drain your funds too quickly.
Stage two:
This stage usually takes place between ages 75 and 85.
You activeness will likely begin to wane.
The result?
Your cost of living will decrease a bit from stage one.
If you are giving a conservative number, you should plan a 3 percent increase from your normal expenditures.
Stage three:
This stage begins at age 85.
It will continue until you expire.
Time at home and time with family increases.
Your expenses will decrease—unless you have major health care needs.
If you are not going to factor in the health care costs, you could plan for a 2 percent increase from your typical spending.
With health care costs, you would need to budget in much more.
During this time, you will must review and finalize your estate plan.
Any assets remaining at your death will need to be passed along.
A proper estate plan will do this in the most efficient way possible.
Really, you should not wait until age 85 to begin your estate planning.
This should be a priority throughout your entire adult life.
How do you start?
Work with an experienced estate planning attorney.
He or she will be able to help you create a plan for your specific goals and needs.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
How?
Two helpful online resources are just a mouse click away to assist with your due diligence: Avvo.com and Lawyers.com.
Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Kiplinger (February 8, 2018) “The 3 Spending Stages of Your Retirement”
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