When thinking about the ideal formula for a successful retirement, it’s only natural to start with one of the most important variables: money.
It’s true that time, discipline, and a solid investment strategy can be your greatest allies in securing a comfortable retirement.
But it doesn’t stop there. While these components are undoubtedly important for funding your retirement, they cover only a portion of comprehensive retirement planning.
Looking beyond the overarching goal of building a retirement nest egg can be challenging when retirement feels far off. But if you want your golden years to be among your best, it will take some thoughtful preparation and effort on your part.
This preparation should extend beyond saving and investing to include other key components, such as:
- Establishing your estate and legacy planning
- Maximizing Social Security benefits
- Assessing insurance needs
- Planning for tax-efficient withdrawals from your accounts
- Designing your ideal retirement lifestyle
So, whether you’re nearing retirement or eager to get a head start on preparing for it (our favorite approach!), let’s explore how these factors affect your retirement plan.
1. Estate and Legacy Planning
You’re working hard to secure your financial future. If the wealth you’re accumulating is projected to last beyond your lifetime, you should – and do – have a say in what happens to it. But it’s your responsibility to document your wishes legally; otherwise, the fate of your assets could be left to the courts.
Keeping your legal documents current is essential, particularly as you near retirement. This includes wills, trusts, powers of attorney, and healthcare directives. These documents outline your wishes after your passing and guide decisions in case of your incapacity.
Working with an attorney to create your estate plan may take some time, though it is a worthwhile time and financial investment. But a practical first step for now is to make sure you’ve designated beneficiaries for all your accounts and insurance policies – whether it’s family members, a close friend, or a charitable organization.
Planning ahead gives you the authority to have the final say and can grant you peace of mind during retirement.
2. Social Security Strategy
In a time where uncertainty about the future of Social Security is prevalent, it’s easy to put off thinking about it, especially if retirement is still a distant prospect. However, as a vital source of retirement income for many Americans, you should consider how Social Security fits into your comprehensive retirement plan.
There are many options to consider when claiming your benefits. For example, starting to receive your benefits as early as age 62 results in smaller monthly payments, while waiting until full retirement age (usually between 66 and 67, depending on your birth year) or even later can increase your monthly benefit.
If you’re inching closer to retirement, start comparing your options, taking into account factors like your health, longevity, and financial needs.
If retirement is still a ways off, now is the perfect time to start regularly reviewing your Social Security earnings record for accuracy, as this directly impacts your retirement benefits.
It would be ideal to fund your retirement through your own assets, but a little income support and inflation protection in the form of Social Security won’t hurt!
3. Insurance Coverage
You probably wouldn’t be surprised to hear that healthcare expenses generally account for the largest portion of retirement spending.
As we age and our healthcare needs increase, there’s a corresponding rise in spending on things like premiums, deductibles, and prescriptions. While Medicare helps with many of these costs, it doesn’t cover everything. What does that mean? In some cases, supplemental insurance (with even more premiums) is needed to bridge the gap.
But sometimes, the extra insurance cost is a wise investment because lacking adequate coverage can be detrimental to any retirement nest egg. This is particularly true in cases where long-term care, such as a nursing home or in-home assistance, is needed and no assets are set aside or no insurance coverage is in place.
In addition to health-related insurance, evaluating whether you might need other types of insurance as you near retirement is essential. This can include umbrella insurance for additional protection against accidents or lawsuits and life insurance to financially protect your family, to name a few.
Protecting your retirement nest egg with the right amount of insurance (without going overboard) should be a priority. Since coverage needs vary for everyone, it might be helpful to work with a financial advisor who can help you identify gaps and opportunities (and it doesn’t hurt to start early because premiums tend to be lower when you’re younger!).
4. Tax Planning
Think about all the accounts you own – 401(k)s, Traditional IRAs, Roth IRAs, taxable brokerage accounts, and savings accounts, to name a few. Did you know that the order in which you withdraw from these accounts during retirement matters?
Withdrawals from each account can be taxed differently, and strategically managing these withdrawals can help minimize tax implications and maximize your retirement income. That’s why having a mix of pre-tax, after-tax, and taxable accounts is often emphasized, as it gives you flexibility in managing taxes in retirement.
Managing these withdrawals in a tax-efficient manner requires strategic planning and consideration of factors like income needs, tax brackets, required minimum distributions (RMDs), and future tax obligations.
So before you clock out for the last time ever and start pulling money out of any old account to fund your retirement, consider adding a meeting with a financial advisor or tax professional to your pre-retirement to-do list. They can help you find the most tax-efficient way to manage withdrawals and potentially identify other tax-beneficial strategies.
5. Lifestyle Planning
Retirement planning isn’t all serious business, so let’s get to the fun part.
Sure, building a retirement nest egg is non-negotiable for securing a comfortable retirement, but money is rarely ever the end goal. Financial stability is a means to facilitate a richer and more meaningful life rather than being the ultimate goal in itself.
With that in mind, how do you want to spend your retirement years?
Are you drawn to the beach life? Do you see yourself traveling or possibly even relocating to another part of the world? Alternatively, do you plan to stay close to home, cherishing every moment with your grandkids? What activities do you want to engage in to stimulate your mind, foster social interaction, and find personal fulfillment?
Lifestyle planning for retirement not only helps you assess your financial needs for retirement, allowing for better preparation, but it also supports a smooth transition into this new phase of life, preserving a sense of purpose that can sometimes be lost after a lifetime of work.
Creating Your Comprehensive Retirement Plan
Determining how much you’ll need to fund a comfortable retirement can feel like an overwhelming task, and it can become even more complex when layering on additional considerations. However, gaining clarity on what you need to plan for and starting early can ease the stress and help pave the way for your ideal retirement.
Your finances are personal. There are no universal rules for which legal documents you should have, when to start receiving Social Security benefits, and the best sequence for tapping into your retirement nest egg. That’s where we step in – to help you define clear and achievable goals and provide a roadmap to guide you toward them.
Planning for your future is incredibly important, but you don’t have to tackle it alone or feel overwhelmed in the process. To see if we can help you ease the burden of retirement planning and support you in your journey, click here to schedule a conversation today.
