Retirement planning is multifaceted.
Retirement is likely in your future.
Very few people are able to work until the day they die.
Because retirement is fairly inevitable, you should be preparing for it.
According to a recent Kiplinger article titled“5 Bases You Need Covered With Your Retirement Plan,” retirement planning involves more than merely investing.
What else does it include?
Income Planning
Income looks different in retirement.
It will no longer be coming from your employer.
It will be coming from sources like Social Security and your investments.
What does income planning look like?
Obviously, you need to plan to cover your expenses in retirement.
Start by analyzing your income and expenses.
You should maximize Social Security benefits.
Planning for inflation should be included in your investment strategy.
Especially as you near retirement, your investment strategy should change.
Tax Planning
Taxes can become a substantial burden in retirement.
You should plan to decrease tax liabilities.
To do this you should review your portfolio.
Especially important is leaving the tax-free assets to your beneficiaries if possible.
For example, if you want to support your favorite charities at death, then use retirement funds to satisfy any charitable bequest instead of assets like real estate, life insurance, or non-retirement fund investment accounts.
Why? The charities do not pay income taxes on the retirement funds, while your heirs must pay income taxes on each distribution at ordinary income tax rates.
Yikes!
Health Care Planning
Health care is not cheap.
It is only getting more expensive, especially as we age.
How will you pay for these bills in retirement?
Examine Medicare Parts A, B, and D, then supplement your Medicare coverage with a solid Medigap plan.
Getting long-term care insurance can also be a wise move.
Estate Planning.
You will likely need help in passing assets in the most efficient way possible to your heirs.
An experienced estate planning attorney can help you with this.
It may include creating a revocable living trust to pass assets probate-free to beneficiaries.
Your attorney can also give advice on the best accounts to leave to your beneficiaries, while helping coordinate the alignment of your beneficiary designations and asset titles.
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 (May 4, 2018) “5 Bases You Need Covered With Your Retirement Plan”
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