Yahoo Finance 5 End-Of-Summer Planning Tips for Boomers
Every year, September brings a time to switch summer outfits for heavier winter clothes. It is also a time of new beginning and/or clean-up of old issues. But make no mistake, while this is a time for change, for some, it is a time to get their act together.
No matter who you are, here are five things you can do to be more prepared for your current or future retirement.
Put together your "written" financial plan. I know I have talked about this topic for years, but I am committed to getting everyone as prepared as possible. The financial plan is the best place to start. It looks at a large number of variables and then after some calculations, tells you whether you can retire or not.
It's interesting that most people have enough money that they will likely not run out in the next few years. But that is not what I am worried about. I am much more concerned about people running out of money 20 or even 30 years from now.
With a financial plan, you can see everything about your financial situation. But most importantly, you can tell what the probability is of ending up without a paycheck. And let's be honest, if you are going to run out of money in retirement, do you want to know now, or when you run out?
Know what rate of return you need on your investments. Think about this for a second; when you were working and contributing to your 401(k) and individual retirement account, you were likely more aggressive. And you could justify that because you probably had a lot of time before you were ready to say goodbye to your boss forever. But once you hit retirement, it's time to consider getting more conservative. So now when constructing your retirement portfolio, you want to think about the rate of return you need. If you find that you only need 5 percent to retire comfortably, why would you invest like you were trying for 20 percent? That's too risky.
I met with a potential client a few years ago. She had just retired and had been using the same broker for about 25 years. She wanted to meet but told me that she only wanted a second opinion and that she would not be moving her accounts to my company because she was happy with her broker. When I started looking at the lady's portfolio, I was surprised to find that even though she had just retired, her broker had her in 100 percent stock. I was both surprised and upset, to be honest. I feel this lady's longtime broker fell asleep at the wheel and did not even think about the potential negative impacts. If a downturn would have come, this poor woman could have lost a significant amount of money. She might even have had to go back to work. Once she realized how serious this issue was, she decided to leave her broker of a quarter of a century. I sincerely believe that he was not looking out for her best interest. We helped to make her portfolio more conservative and potentially avoid a financial disaster.
Come up with an income plan. I am often asked; "Where do I draw my income from?" My response is always the same. You should consider withdrawing from your least tax-efficient vehicles first. For example, if you have a lot of cash, that is where you get your initial retirement paycheck. Next would be your taxable investments, followed by your retirement accounts (only minimum required distributions.) Finally, you would withdraw from your Roth IRAs last, as they are the most tax efficient.
Think about survivor and legacy. The first question; "What happens when I die and who will need money?" If anyone is dependent upon you for income or assets, you need to ensure they will be taken care of. You could accomplish this by having emergency funds in the bank, purchasing a life insurance policy or by electing pension survivor benefits. It really just depends on you and your beneficiaries.
Once you have thought about survivors, the some additional questions are; "Who will receive money from an inheritance standpoint? Will anyone get it too early or too late? Will they get too much, too quick?" We have all seen it, money can absolutely ruin people. So a good way to protect someone from getting money too quickly is to put your money into a trust. With a trust, you can delegate more freely who will get what and when they will get it. You should meet with your attorney who can go into the specific details of a trust.
Ensure you properly plan for Social Security. For some, they have already elected to take benefits and so there may not be a way to change, especially if you have been taking benefits for more than 12 months. But for others, proper planning can likely increase the amount you get by a substantial amount. One interesting fact about Social Security is that if you elect not to take your Social Security check at full retirement age (let's say age 66) but instead wait, your benefit will increase by 8 percent per year up to age 70. So this equates to an increase of more than 32 percent. And once you begin receiving this benefit, it goes on for life at that higher rate. Remember, since this 8 percent per year bonus stops increasing at age 70, everyone should be taking their Social Security benefit by then.
One additional note; while you are delaying your own benefit, you may be eligible to take a spousal benefit (typically equal to half of your spouse's full retirement benefit.) While you are taking the spousal, your Social Security benefit continues to increase by 8 percent until age 70.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.You should consult your advisors and be sure you understand all of your options before you make any final decisions, but following these simple steps can help you significantly in retirement.
Kelly Campbell, certified financial planner and accredited investment fiduciary, is the founder of Campbell Wealth Management and a registered investment advisor in Alexandria, Va. Campbell is also the author of "Fire Your Broker," a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisors abandoned their responsibilities to help them weather the storm.
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