Many people only focus on what’s happening inside their portfolio at this very minute. A recent Kiplinger article asks, “Is Your Retirement Plan Completely Backward?” According to the article, many investors have their tools, but not a plan.
That’s backward, because retirement planning is a process. Consider these steps:
Goals.You may want to retire at a certain age and/or with a certain income to maintain your lifestyle. You may want to achieve the financial freedom and flexibility to do what you want, when you want, with your money. Some others want to leave some kind of legacy behind for their children. It may be both. It’s critical to understand your objective before you set out to achieve it.
Strategies. Part of your strategy should be an income strategy that will reliably cover your expenses for the rest of your life. You’ll need to have an idea of what your expenses are. You’ll also need to understand how you can maximize your Social Security benefits, plan for inflation, know how a surviving spouse will adjust to any changes in income and expenses and help guard your assets against longevity risk, with a retirement that can now last 30 years or longer. You don’t want to outlive your income.
Your financial strategy should help protect and preserve the assets you don’t draw from month to month. Your tax strategy should also legally keep more money for your family. Your health care strategy needs to address rising medical costs and look at long-term care options, in the event of a chronic illness.
Your legacy strategy must ensure that your money is passed on to your beneficiaries in the most tax-efficient way, and your estate doesn’t wind up in probate. Talk to an estate planning attorney about trusts and other protections to prevent your IRA from becoming fully taxable to your beneficiaries upon your death.
Financial vehicles. You’re now ready to confidently select the financial tools you’ll need. There are plenty to choose from, depending on your needs. Each of them has its pros and cons, depending on your specific situation and objectives.
About the Author Kyle Robbins is the founder and sole owner of The Law Offices of Kyle Robbins. He received his J.D. with honors from the University of Texas School of Law and his B.S. in Food Chemistry and Microbiology from Oklahoma State University.