Save, stretch, protect: A financial expert on how to begin plotting your retirement strategy

“Hope for the best … prepare for the worst…”

These were words of wisdom I gleaned from my Father, a depression baby who was a tremendous source of both common sense and practical advice for me. Although he was speaking in general terms, this wisdom rings true especially when it comes to retirement planning. Today, there is an astounding number of aging professionals who are putting off retirement because they are either financially insecure or they are afraid that they will be if they stop working. If you are at or near retirement age, the time to plan is now. So many people don’t even know where to begin. Here’s what you need to know to get started:

The best way to begin plotting an exit is to identify the different risks you might face after you retire, (i.e. preparing for the worst.) Though these risks all overlap a bit, there are three basic areas of risks to consider:

1. Financial risks

Running out of money is probably every senior’s greatest fear. Another is not being able to enjoy the golden years in a manner that is affordable and enjoyable. Being proactive and doing some careful budgeting and planning in advance is critical. As the old adage goes, “an ounce of prevention is worth a pound of cure.”

What can you do now?

In the budgeting process, be aware of what your prospective annual costs are and estimate your life expectancy. Match your planning needs to accommodate your unique retirement goals (hobbies, travel, family, fitness, etc.) It’s also important to start building up a financial “war chest” now to meet your budgeted needs.

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Some ideas to expand your financial “war chest” include:

  • Delay social security to maximize payout (if possible.)
  • Delay taking retirement account distribution to 70.5 years.
  • Consider moves to lower tax states like Florida.
  • Consult with a tax expert to make sure you are getting maximum benefits.
  • Plan for a part-time job after retirement to augment retirement funds…almost 22% of Americans 65 and older expected to have a part-time or full-time job by 2026.
  • Balance your needs with taxes, death, legacy goals.
  • Manage your debt.
  • Consider life insurance as an asset class which can diversify your portfolio and provide tax-free growth and protect against market volatility.

2. Health risks

When planning for retirement, it’s really important to consider the possibility that you’ll need long-term care. According to a Nationwide Survey completed in 2018, over 70% of individuals over the age of 65 will need some type of long-term care at some time in their life. 77% of these respondents would prefer to have their long-term care needs to be met in their own home. The annual costs for long-term care can range from $50,000 to over $100,000 per year! Often times, children’s inheritance may be utilized for these costs.

What can you do now?

Plan early for this expense. If you don’t have the cash saved already (and let’s face it, not many people do,) there are many creative ways to generate the capital and stretch your assets.

For example, you should explore the value of your life insurance policy as it may be a source of hidden cash. Thousands of individuals have life insurance policies they are not aware of and billions of dollars in life insurance benefits stemming from long neglected or unknown life-insurance policies are everywhere. Too few understand they may be able to cash out with a “life settlement,” or sale of an existing life insurance policy to a third party. Use this Life Value Calculator to estimate how much your life insurance policy will be worth when you sell it.

According to elder care attorney, Gary L. White, you can also explore strategies that preserve and protect your assets for your loved ones while shifting the costs of long-term care to the state and the federal government through Medicaid planning. There are numerous tools and strategies used depending on your marital status, the size of your estate, the amount of your gross monthly income and timing of your Medicaid application. For example, one tool is to establish a special irrevocable trust to reorganize your assets so that later, those assets will not be counted for Medicaid eligibility purposes. When planning, be aware of Medicaid’s five-year look-back period related to the transfer of assets for less than fair market value and consult with an attorney who is experienced in Medicaid planning before implementing any strategies to avoid “spending down” your assets in order to qualify for long-term care benefits.

3. “Meaning of life” risks

It’s easy to neglect this risk when planning for retirement. While it may seem less pressing than the other two, it is still an extremely important aspect to consider. How can you remain happy, healthy, and social after retirement? Passion and enthusiasm are the core ingredients for humans to thrive.

What can you do now?

When plotting your career exit, reflect on the things that are most important to you. Make a list of all the things that give meaning and purpose to your life (ex. hobbies, projects, social activities, spending time with friends and family, traveling, etc.) and guide your life by those values or activities. Another idea is to look at your existing life insurance policies to see whether you can trade paying the ongoing premiums for a portion of the death benefit to go to your heirs or favorite causes. Planning for philanthropic endeavors are a great way to bring fulfillment to your life.

Bottom line

In order to save, stretch, and protect your assets, create an income strategy to allow you to maintain your lifestyle and not outlive your money; a tax strategy which integrates with your investment and income strategies and is cognizant of current tax environment; health care strategy that considers your long-term care needs; and a legacy strategy which will provide blessings and not family conflicts

In short: “Hope for the best … prepare for the worst … ”

David Kottler is a national speaker, author, and entrepreneur who combines his legal and business experience to help his Americans fulfill their life mission both philanthropically and financially. Also known as “The Insurance Dr.” Kottler draws on his 24 years of financial planning experience to create game-changing results for his clients through his innovative “True Value”™ life insurance review process. Kottler is the author of two books. His latest book, The Best Kept Money Secret in Your Insurance Policy, was written to empower his clients and other financial professionals to get the most out of their life insurance policies in their portfolios.

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