When it comes time to plan for retirement, there’s a lot to think about before making the plunge. From your cash flow needs to insurance requirements and tax strategy, your finances are a central factor when answering questions like: “When can I retire?” and “How long can I expect my retirement to last?”
As you prepare to discuss your retirement planning with your financial advisor, consider some of the most important issues that may influence your retirement goals and planning:
Anticipate Your Future Cash Flow Needs
In order to establish a retirement investing strategy, you need to know what you’re saving for.
First, you want to consider how your cash flow needs will change as you transition from full employment to retirement. Factors like your anticipated income and expenses will help you to determine your cash flow expenses from month to month and year to year.
Basic living expenses, such as housing and healthcare, will remain somewhat consistent throughout your retirement, though things like downsizing your home can influence whether these will remain similar to your pre-retirement expenses. Variable expenses, such as food, travel, entertainment, and taxes are more dependent on your lifestyle expectations and other plans, and are likely going to fluctuate from time to time throughout your retirement.
Your target savings goals for retirement should factor in both your expected basic and variable expenses. Ideally, your retirement portfolio should provide the supplemental cash flow that you need to sustain your anticipated standard of living during your retirement.
You will also want to consider how Social Security and pension benefits play into your retirement planning. Your financial advisor can help you to determine the optimal time for claiming your benefits and taking advantage of any for which you qualify.
Review Your Health Insurance Coverage and Future Situation
Another essential aspect of planning for retirement expenses is ensuring your ongoing health insurance coverage. For retirees aged 65 and older, Medicare is an option. If you plan to retire before 65, you’ll need to look into other options, like extending your health insurance coverage from your previous employer or your eligibility to save on premiums for a plan from the Health Insurance Marketplace.
Looking beyond your initial insurance coverage needs, you will also want to make plans for long-term care, should you eventually require it. Long-term care insurance, self-funded insurance, and assisted living programs can provide the path for funding your care needs and should factor into your retirement savings strategy.
Plan for Taxes
Taxes are an unavoidable part of your retirement planning and you should prepare an advance tax strategy to compensate for these expenses. If you anticipate that you’ll have a high RMD, look into possible Roth conversion strategies or charitable distributions, if you are inclined to use your funds in such a manner.
If your income will be considerably lower after retirement, then a Roth IRA conversion strategy may relieve some of your tax burden during those low income years.
Take Stock of Additional Situations that May Apply
Lastly, you want to take a look at other situations that may impact your retirement strategy and make a plan for handling them. These include things like:
- Updating an old or outdated estate plan
- Updating beneficiaries
- Outstanding loans on employer retirement plans
- Multiple accounts with similar tax treatment
- A change of residence or house sale
- Business ownership issues, including exit strategy and succession planning
Your financial advisor is the an ideal sounding board as you sort through retirement planning and other related issues. Not only can they offer practical advice for organizing your pre-retirement thought process, but they can provide the tools you need to make informed investment decisions to fund your future.
Contact Jacob Sturgill of Puckett & Sturgill Financial Group to learn more about our retirement planning services and start planning your future today!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.