Approaching Retirement Key Event Timeline
Retirement is a long-awaited milestone and many of us look forward to reaching this momentous phase of life. Retirement planning is a complex, multifaceted process requiring meticulous preparation, regular assessment of the plan’s trajectory, and strategic decision-making. At ClearPlan, we help guide our clients on this journey by creating a Goal Planning & Retirement Timeline (GPRT). The first crucial steps of the timeline involve establishing well-defined financial goals, evaluating current assets, collaborating with an estate planner and tax advisor, and creating a solid roadmap to achieve the desired objectives. This timeline provides the foundation for your picture of retirement by helping to ensure a secure, well-structured retirement, assuring all the aspects of your financial life align with your long-term aspirations and needs. We have much to share … let’s get started.
Creating a Retirement Timeline
The first step of your GPRT timeline journey is a meeting with a trusted financial planner or advisor, one who proactively explores the important financial situation and decisions that lie ahead, well ahead of day one in retirement. You will want help ensure your trusted professionals (estate attorney, tax accountant, etc.) take part in the process and work in concert with your financial advisor. Acting as a team, these professionals will help manage your accounts and assets while assuring continuity and consistency in your overall financial plan. Using available technology such as online account access and other available tools, along with the knowledge to navigate these tools, help empower you to manage your finances effectively and remain up to date about the status and progress of your ongoing retirement plan.
In preparation for your upcoming retirement, your financial planner, together with you, should regularly review your accounts and the GPRT, while making any necessary adjustments and updates along the way. Laws change, family dynamics change, and circumstances change. Working in collaboration with your financial advisor and estate attorney, offers you a routine assessment of assets, changing needs, and beneficiaries to ensure they reflect your current wishes and circumstances. Conducting regular reviews helps you stay on track, make necessary adjustments, and address any changes in your financial situation or goals as they arise or change.
A Sampling of Retirement Timeline Items:
Long Term Care Considerations
Before you approach retirement, performing a Long-Term Care (LTC) analysis becomes imperative. A LTC analysis offers an understanding of potential costs of long-term care and, if needed, considers alternative options for coverage through a conversion or purchase of LTC insurance. Preparing for these expenses can prevent significant financial strain and drain later in life while helping to provide some peace of mind for you and your loved ones.
Collaboration with Estate Planning Attorney
We encourage collaboration between your financial advisor and estate planning attorney. One critical pre-retirement step we recommend is the review of wills, trusts, and estate plans with an estate attorney and your financial advisor. This partnership helps ensure your estate plans are up-to-date and aligned with your current wishes. Creating a Power of Attorney and a Health Care Directive is a vital part of managing estate affairs should you become ill or incapacitated. These legal documents grant trusted individuals named by you the authority to make financial and medical decisions on your behalf if you become unable to do so.
Discussing the creation, structure, and use of trust accounts with an estate attorney is another fundamental pre-retirement consideration. Trusts can offer significant benefits, such as avoiding probate, minimizing estate taxes, and providing a structured way to manage, protect and distribute assets. A conversation about the beneficial features of trusts will help you determine if trust accounts align with your estate planning goals.
Regular discussions about the use of trusts are important to continue throughout your retirement. Trusts offer a critical role and function as a valuable tool in managing your estate, protecting assets, and help to define specific financial goals. Ongoing conversations with your estate attorney will ensure that your trusts remain effective and align with your evolving needs.
Life Insurance & Annuities
In addition, a life insurance analysis is an integral part of the planning process. Insurance professionals help to assess your current life insurance policies and determine if additional coverage may be beneficial
in addressing future estate tax issues or providing for your loved ones. Proper life insurance planning helps to protect your designated beneficiaries and helps assure management of your estate is efficient and executed according to your wishes.
Once you retire, activating the annuity living benefit feature can help provide a stable income stream. If needed, the activated living benefit helps provide financial security via a guaranteed flow of income throughout retirement, helping you maintain a preferred standard of living.
You may also want to discuss non-qualified inherited annuities with your financial advisor. These annuities help provide greater flexibility in managing distributions and provide additional benefits for your beneficiaries.
Social Security & Medicare Analysis
Around the age of 61, a Social Security analysis can provide valuable insights into the optimal timing for claiming benefits. This analysis helps you maximize your Social Security income, offers various scenarios, and considers factors such as life expectancy, income needs, and spousal benefits.
A Medicare discussion is recommended at least six months before you turn 65. Understanding your Medicare options and enrolling on time is crucial to avoid penalties and helps to ensure you have adequate healthcare coverage during retirement. This discussion helps you navigate the complexities of Medicare and make informed decisions about your healthcare needs.
Simplifying Your Financial Landscape
Consolidation of your accounts is an ongoing process that enhances efficiency while simplifying financial burdens. By consolidating accounts, you can reduce administrative headaches, streamline your investment strategy, and ensure a more cohesive approach to managing the assets in your portfolio.
Once your annual employment income comes to an end, qualifying for a home loan or other large loan may be challenging. You may experience additional financial flexibility by securing lines of credit or loans prior to retirement, ideally six months prior to retiring. Access to credit helps to manage unexpected expenses and provide a comforting safety net, helping to ensure you have resources available without disrupting investment strategies in place.
Planning Your Income
At the crucial point of retirement, determining the order in which you access and use assets in each of your accounts is imperative. This strategy involves earmarking specific accounts to exhaust first as a source of funds for income. Prioritizing the order of your accounts to use for income, this strategy weighs tax implications, considers your timeline of need and offers optimal use of your assets and investment holdings. A well-thought-out plan outlining the order of accounts to access for your income helps to minimize taxes and helps extend the longevity of your retirement savings.
Evaluating the prospect of a Roth conversion is another key step in your retirement timeline. Converting traditional IRA funds to a Roth IRA offers tax advantages, especially if you expect to be in a higher tax bracket in the future. A Roth conversion requires careful analysis to determine the most advantageous timing, the related tax implications and the dollar amount converted.
At age 70½, Qualified Charitable Distributions (QCDs) from your IRA may be a worthy consideration. QCDs allow you to donate up to $100,000 directly from your IRA (per year) to a qualified charity. After age 73, any QCDs disbursed from an IRA count toward your RMD requirement, subsequently reducing your taxable income. Utilizing the QCD option helps to reduce your tax liability while supporting your favorite charitable causes.
Communicating with Your Family
Many clients understand the value of communication with professionals, such as an attorney or financial advisor, but may fail to provide adequate communication to family members. At ClearPlan, we help organize and facilitate family meetings. For you, your family and all those impacted by circumstances caused due to your ageing and eventual passing, we provide a transparent, open forum to make your ultimate wishes known. An environment where you can declare your wishes, address questions, and seek understanding of your wishes by all. The family meeting may serve as a “celebration” of the thorough and thoughtful retirement and estate plan you have created. By sharing your plan in a detailed manner, you inspire the next generation to understand the many steps taken to create the plan and encourage heirs to develop a succession plan of their own. Family meetings also offer an opportune time to communicate your wishes for the eventual use of any inherited assets by the beneficiaries.
We facilitate communication and help provide clarity to your loved ones, address any specific concerns or questions, and help to ensure your family understands your wishes and the steps you have taken to secure your financial future. Using discretion, we review critical information and discuss significant topics important for family members to be aware of and understand. These meetings offer a supportive, informative, and productive environment helping to ease the burden of such transforming life events.
Does Your Financial Advisor Serve as a Proactive & Trusted Resource?
In conclusion, retirement planning is a dynamic and ongoing process that involves careful preparation, routine evaluation for changing circumstances, and informed, thoughtful decisions. Collaborating closely with your financial advisor and estate planning professionals helps ensure a comprehensive, up- to-date, and tailored plan, designed to address your unique needs and goals. Is your financial advisor setting the course and helping to guide you along this journey? If not, why not?
ABOUT THE AUTHOR:
Troy Brewer has a talent for connecting successful people while serving as a respected mentor on the path to prosperity. By facilitating an all-encompassing approach to wealth management, Troy utilizes his extensive network of resources including estate planners, accountants, and business leaders to develop creative financial solutions for his clients. By fostering meaningful relationships, orchestrating financial strategies, and serving as a trusted confidant, Troy helps his clients achieve their desired life and legacy.
Troy has spent more than 25 years in the financial services industry, focusing on maintaining tight multigenerational relationships through a process-driven approach. As a Chartered Retirement Plans Specialist® and member of the Baltimore Estate Planning Council, Troy specializes in low-cost investments, complex / multigenerational wealth planning and tax efficiency. His clients include business owners, corporate executives, and affluent families. Learn more about Troy or schedule a consultation.
Opinions expressed in this article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and subject to change without notice. Investing involves risk and you may incur profit or loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
