5 Nuggets for a Successful Retirement

5 Nuggets for a Successful Retirement

Like most Americans you probably feel some anxiety regarding your vision of your retirement. Don’t worry many others both young and old feel the same as you. With the decline of the defined benefit pension you are left to figure out a plan mostly on your own with little formal or informal education. Don’t worry I have come up with a simple checklist to help you be on your way to making your plan successful. Please note that these are just considerations and there are many other factors to account for as individual circumstances vary.

1. Design Your Income Pie Chart

When you think about retirement you have to think about where your income will come from to sustain your living expense needs…things like food, shelter, transportation, clothing, and medicine. Where do you plan on getting the income for these necessities? If you’re like most people these will probably come from: social security, annuity income, withdrawals from company 401k plan (or other qualified plan), withdrawals from individual retirement accounts, the sale of your business, or if you are lucky a pension plan from your employer.

Draw a circle and divide it into sections. You can ballpark the percentage breakdown of each income category until you are able to predict a more accurate number as you inch closer to your retirement. But at least you are forming the shell of a game plan to get you where you want to be. The accuracy can be built on and improved over time.

2. Don’t Ditch That Life Insurance Policy Yet

The situation becomes your kids are grown, the mortgage paid off so the natural instinct may be to drop your life insurance program all together. However, this crucial policy may be the key to the long term financial security of a surviving spouse in the event of a spousal death with a prolonged illness, unforeseen expenses in old age, lack of savings, and poor investment performance of retirement accounts. The tax free (federal income) death benefit could serve pragmatically as asset replenishment for a surviving spouse; help your family pay for funeral expenses, pay estate taxes (for wealthier families) or left as an inheritance to adult children, grandchildren, or your favorite charity or church.  It could also serve as supplemental retirement income if needed. In the event you own a term life policy you may consider converting your plan to a permanent insurance policy to receive some of the benefits stated above. If you have a permanent policy that you can no longer afford you may convert your policy to a reduced paid up plan to keep some of the death benefit or utilize a 1035 Exchange to transfer the cash value tax free to an annuity. Consult your life insurance agent for your specific program.

3. Get Smart on Social Security

The fact is that most Americans will rely heavily on Social Security to make ends meet in retirement. Be proactive and learn about your Social Security benefits and entitlements ahead of time so that there are no surprises. Consider the pros and cons of receiving benefits earlier or waiting until full retirement age. You canresearch websites such as http://www.ssa.gov to receive information from the horse’s mouth instead of second hand.

4. Pay Off What You Owe

Debt repayment is also an important part of your plan. Try to minimize or eliminate the amount of debt you carry into retirement. The debates rage as to the order of debts to pay down first or should you even retire secured debts such as a mortgage. Although I have opinions on this issue this article will not get into that debate.

5. Get Your Final Affairs in Order

You should make it a top priority to get your final affairs in order while you still have an opportunity. Funeral expenses are arguably the most expensive purchase made during the golden years. When you plan these items while you are still working you can use your retirement savings elsewhere. Some items that you should take care of are:

  • A. Get a will done (or update your current one)
  • B. Estate plans (What will happen to your assets?)
  • C.  Life insurance (See #2)
  • D. Pre-arranged funeral or cremation plans- Many local funeral homes allow you to plan and even pay for your funeral or cremation in advance. This relieves your loved ones from having to pay and plan for these arrangements during a very difficult and emotional time. Let them know what your final wishes are so they are aware. More info can be found at http://www.funeralbasics.org/
  • E. Cemetery plots/property- Along with funeral plans this is another step that is often overlooked. Additionally if you are a veteran get smart on your benefits for a VA cemetery burial and memorial.
  • F. Memorial (headstone) – I have professional experience designing and selling these and it can be a hot topic between family members. By planning in advance you will be able to prevent disputes and relieve stress for your family.

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