Financial Planning Part 4: Retirement Strategies and Estate Planning
Welcome back to our financial planning series. This is the final piece of the puzzle in the series: retirement strategies and estate planning.
Let’s get started…
Many people think that retiring is the ultimate goal.
It’s time to spike the ball and hit the showers. Not so fast, whether it is early retirement, late, or right on time there is still a lot the game left to play. Don’t get me wrong, a fancy end zone dance is certainly appropriate but just don’t get carried away and end up hurting yourself.
It is still worth doing some periodic preventative maintenance to ensure you don’t run out of money. It is a good idea to review a few things at least annually and whenever life events occur. After all, you’ve worked so hard to get here, you want your money to continue to work for you not against you. Some things worth review are: your annual withdrawal rate, health care, taxes, RMD, beneficiaries, and income sources.
The standard annual withdrawal goal in the industry is 4%. Some people are better suited for more and some less. Some people prefer a fixed rate and some prefer a variable rate of withdrawal based on various personal and economic decisions. It is a least worth reviewing so you know if you need to make changes.
Health care is a constant battle.
Review your options. Review the costs. Roll with it until the next open enrollment period which are typically towards the end of the year. Rinse and repeat.
We discussed earlier how tax efficiency can save you lots of money. Each year things change with tax laws. Some will impact you and some won’t. Work with your CPA to keep up to date on the things that will impact you.
Some retirement accounts, such as 401ks, traditional IRAs SIMPLE, and SEP IRAs, have required minimum distributions, or RMD. The IRS says that when someone reaches 70 ½ they must withdrawal at least a minimum amount of money from the account. It is worth knowing what you need to do to avoid penalty.
Beneficiaries should be reviewed periodically and after life events.
As things in life change you want to make sure you update beneficiary information to ease the process on your loved ones in the event something happens to you. The last thing anyone wants is for that stuff to be tied up in court.
I mentioned looking at other income sources earlier. This could be side jobs in things you’re interested in, pensions, social security, or just selling some of your stuff. Are there other sources of income that you could/should be looking at? Social Security is a tricky one because everyone is in a different situation. The earlier you take it, the less money you get per check. Before you take it, know what the options look like.
When it comes time to start working on your estate plan, you’ll want to enlist the services of an estate attorney.
A lot of people think estate planning is just for uber rich people. This isn’t the case. The goal of an estate plan is to ensure your wishes are carried out as efficiently and effectively as possible. Some are more complicated than others, but at a basic level everyone should have a will (which says how you’d like your assets distributed), a living will (which is your health care wishes), a power of attorney (which gives someone authority to make financial decisions on your behalf), and a health care power of attorney (which allows someone to make health care decisions on your behalf). Other elements of an estate plan could include trusts to hold assets, ensuring life insurance gets paid to beneficiaries, gifts, and tax exclusions.
Previously we talked about how there is not a one size fits all approach to investing. This is true as well with financial planning. To help you find the best approach for you it is important that you have a basic understanding of what is involved. This will help you build the proper team of financial advisors, CPAs, and attorneys.
Hopefully you now have a basic understanding of a financial plan. This concludes our financial planning 101 series. Have a great day!