Thinking About Retirement

As you start thinking about your retirement here are a list of top items to be reviewed.

Income & Expenses

An assessment of your cash inflows and outflows through your retirement years will guide your decisions for your retirement planning.

For this analysis, it is important to think about the type of lifestyle you desire during your retirement. The lifestyle chosen could be significantly different from your current lifestyle, in which case your living expenses in retirement will be different from your current expenses.

Secondly, consider all income streams available to you during retirement. This will include any pensions, any income from your investments, social security benefits, distribution from annuities, etc.

Generally speaking, it is important to limit your expenses within the total income you receive after taxes on a monthly basis.

Health Care

While you are employed, your employer may be picking up the tab on your medical insurance premium. When you retire, you most likely have Medicare coverage. Medicare coverage begins after a certain age limit and it is important to know that if you retire early, you are on your own to find the a medical insurance coverage.

Many times based on your chosen lifestyle, the basic Medicare coverage may not be sufficient. You may need supplemental coverage that costs additional premium paid out of your pocket. It is important to assess your health insurance cost in relation to the lifestyle you choose.

Another important aspect of health care is long term care. Long term care insurance addresses health care expenses for extended nursing or hospice care. Based on your family history if you are prone to any chronic conditions such as stroke or dementia, long term care insurance would be beneficial.

Assets

Take an inventory of all the assets you have. These include your home, properties, investment accounts, retirement accounts. If you have any debt to be paid off as you enter retirement, make a note of this. It is ideal to get all your debt paid off before you enter retirement.

During retirement, your assets start contributing to your living expenses. Understand how much income each asset is generating. Some assets may be part of tax deferred retirement plans. You may be owing taxes when you monetize those assets. It is important to understand which assets have tax liabilities. Based on this information, you can prioritize the monetization of assets to minimize the impact of taxes.

Conclusions

Retirement planning involves considering all aspects of your of your life, not just the financial aspects. The different aspects influence each other. For example, your choice of lifestyle will impact the type of health care insurance you would need which would in turn impact your expenses. It is important to consider these cross influences and identify the best course of action during retirement.

Talk with your financial advisor or book a time with us to review your planning for retirement.