“What can you do for me?” It’s one of the first questions I am asked by a potential new client. And my response is the frustrating “it depends.” Truth is, the key components in financial planning are tailored to a specific phase of life. A young couple with a growing family, for example, may need planning help with education funding strategies, investment allocation choices, cash flow budgeting and insurance coverage needs analysis.
For those that are thinking of retiring within the next decade, the issues can be very different. In fact, you should never wait until you’re very close to retirement to make major post-retirement choices. Instead, think of these key topics, and make a plan for how you’ll address them.
- What will retirement look like?
You may be building a sense of when you retire but have you thought about what retirement will be like? Planning to work part time, travel the globe or simply catch up on gardening or read all of those unread books? Those choices will help decide if you have the right resources in place to meet your goals.
- What’s the right time to start taking Social Security?
If you are in poor health of have a history of poor family health, then taking Social Security as soon as possible makes ample sense. If not, you should hold off collecting Social Security for as long as possible. Each year you wait means another 8% increase in your monthly payment. According to Charles Schwab, delaying taking Social security makes ample sense if you end up living past 80 (accounting for certain factors).
- How much should I be putting into my retirement plans while I am still working?
If you’re able to keep funding your nest egg, it makes ample sense to do so, especially I there is an employer match involved. Just be sure that you’re investing in the kinds of assets that help align your portfolio to the right mix of offensive and defensive assets (i.e. stocks vs. bonds)
- Time to trim living expense?
Many soon-to-be-retirees start to scale back their expenses, buying fewer clothes, dining out less, and having their cars last longer. Creating a 60-month (5-year) budget can help you figure out ways to squeeze out more cash flow, and also establish a base-line of expenses for when retirement day comes.
- What about long -term health care expenses?
This is one of the biggest unknowns in retirement yet requires careful thought. For some people long-term care (LTC) insurance or hybrid insurance is a wise move. Yet for others, self-insuring (i.e. paying out of pocket if you require LTC) makes more sense. Talk to a fee-only financial planner to get a sense of which approach is best for you, based on your assets in place.
- How to protect your spouse if you pass away?
There are a range of strategies to pursue to ensure a stable asset base and income streams for your spouse to live worry-free in retirement. Start with a discussion of what kinds of assets might need to be sold (such as a second home) if other assets in place aren’t sufficient.
Once in retirement, you’ll be making more decisions such as charitable giving strategies, tapping into a reverse mortgage if cash is tight, setting aside funds for unexpected home repairs, and more.
If you would like to learn more about these topics, feel free to contact https://huguenotfinancialplanning.com/ and set up a free 30-minute “get acquainted” session