lifestyle04lifestyle03 EARLY RETIREMENT & POST-RETIREMENT PLANNING

            Planning for retirement has become one of the most important issues facing mature workers.  Protecting and growing one’s retirement nest egg after retirement has also become one of the most important financial issues facing seniors today.  The recession that began around the beginning of 2000 and continued on into 2003 has been one of the longest down turns in the economy since the early 70s.  The bear market that began for stocks around March of 2000 announced the end of the Internet bubble, the slowing of the communications markets and a general world wide economic slow down.  Interest rates are also the lowest in almost 44 years deeply cutting into senior’s savings growth.  On top of the economic slump, we have also experienced the terrorist attack of the World Trade Center that has further hammered the U.S. economy.  Now the war on terrorism will drain the federal tax system and probably cause new tax increases. 

These economic and military issues, coupled with the rapid increase in medical costs, and the increasing cost of long-term care spells trouble for retirees.  Pre-retirement, retirement and post-retirement planning must become an important part of all Americans if they are to achieve and maintain financial dignity during their retired years. 

So, what should those planning for retirement and retired seniors do to protect their financial future?  How can older Americans protect their savings and investments and continue to maintain the quality of life they have grown to expect?  The solution is to spend time planning to protect their savings, reduce taxes, evaluate long-term care risks, insure against automobile liabilities with umbrella (additional liability) insurance, seek advice on retirement income management and invest without risking your principal.  But most of all, seek advice and continue to review your financial situation and “financially speaking” plan every year.  Retirees can no longer put money in a bank, mutual funds, bonds, real estate, stocks and other assets without continuing to review all options.  You can no longer leave your retirement plan or 401(k) invested in a portfolio and forget it.  You must keep your eye on everything you do financially. 

Over the past 30 years there are a number of financial mistakes we see pre-retirees and seniors making that can ruin their finances.  Here is a brief summary of a few of these mistakes and what you can do to prevent making these mistakes.

  1. TAX PLANNING – We find very few people planning to minimize their taxes after retirement.  Most people transition into retirement doing only tax preparation and have set themselves up to pay taxes for the rest of their retired life!  Why - because CPAs and tax advisors are not doing tax planning – they only do tax preparation?  In fact, many seniors treat the tax issue so lightly they think they can do their own taxes using cheap software!  They simply do not think anything about tax planning during the year to cut taxes.

The solution to reducing taxes is to begin doing tax planning.  Tax preparation will not save you one dime.  If you want to read more about tax planning, ask for our report, “INCOME TAX PLANNING FOR RETIREMENT” and ask for a free 1040 tax review.  There is no charge and you may just learn something. 

One of the big benefits of tax planning is that it can increase your monthly income.  We have helped people increase their monthly income from $100 to as high as $500 in increased monthly income purely from tax savings.  Planning is well worth the time spent to see if income management can turn your tax costs around.

  1. ESTATE PLANNING – Retirees should continually review their estate planning because changes often cause a need to alter your plan.  Purchasing an out-of-state property, handicapped child, divorce, death of a spouse and numerous other changes in your life will require an estate plan review.  Every American should have a will and/or living trust.  The difference is that a Will cannot avoid probate and a trust does avoid probate if all your assets are in your trust.  A Will turns control of settling your estate over to attorneys and the probate court whereas a Trust can avoid probate and greatly reduce legal cost.  A trust can also simplify estate issues at a time when the family needs the time to grieve instead of having to face the administrative process of probate.

In addition to needing a will or trust, you absolutely should have a power-of-attorney for finances, health care power-of-attorney, living will and name successors and back up successors for your estate plan.

One major mistake we see many people make is when they try to avoid probate is the use of POD’s on their bank accounts, TOD’s on their investments and placing one or more of their children’s names on the assets.  These options may be OK for poor people, but they will not do a sufficient job for those who have assets.  These estate tools do not begin to address the formal continuance of ones financial affairs when faced with a catastrophic illness or incompetence.  More important than avoiding probate is the need to plan for that older person you will become some day.  Everyone should have in their estate plan a formal process of dealing with death and to provide for the formal care as you face the elder years.  Too many seniors just plan for death and never address the need to plan for the elderly stage of living too long. 

If you want to learn more about the real issues of a complete estate plan, ask for our free estate planning information and how to protect an incompetent family member.

  1. INVESTING IN TROUBLED TIMES – Wow!  We have just seen billions of dollars erased from retirement savings funds.  Many pre-retirees will no longer be able to retire because of losing over half of their retirement savings to the last bear market.

What can you do?  Should you follow your broker’s advice to, “Hold on, the market will come back”?  Can you really sit on your funds or stocks and recover?  Should you reposition assets now while the market is low so that a bull market can help you recover losses faster?  How much money should you keep in low interest rates?  When interest rates turn around, should you sit on long-term bonds as yields drop and lose even more of your principal? 

Answers to these questions require a lot of careful discussion and cannot be covered in a short newsletter article.  If this subject interests you and you are wondering what to do with investments in these uncertain economic times, ask for our free 30 page booklet entitled, “STOCK MARKET LOSSES AND WHAT TO DO TO PROTECT YOUR RETIREMENT”.

  1. COST CUTTING & BUDGETING – One thing that everyone can do to conserve their assets is to spend more time when purchasing major items.  Another area may be to move into a more economic residence if your home is larger that you really need.  Managing money and budgeting is not a fun thing to do for most people, but it is essential when economic times are tough.    

Women can collect coupons from newspapers, mailers and magazines to cut the cost for essential retail purchases.  Men can control their egos and purchased a one-to-two year old vehicle when a new purchase is required.  Personally I quit buying new cars years ago because I finally realized how bad of an investment new vehicles were – with a typical depreciation loss of 20 percent or more the very first year.

If you wish to take a look at your spending so that you can preserve more of your retirement “nest egg”, ask for our sample budget and budgeting forms.  They is no cost for the information.

  1. LONG-TERM CARE – What are your choices to protect your financial future should you face a catastrophic illness or live too long?  When should a pre-retiree consider purchasing long-term care insurance?  Do you really need long-term care insurance – “I hear it is expensive?” 

There are six basic choices you have in evaluating what you want to do regarding your long-term care requirements.  These six choices are as follows:

The first step you need to take is to understand estate recovery laws in order to do the right planning.  Without understanding estate recovery laws as they relate to a single person, illness of the first spouse and surviving spouse, you cannot do wise planning.  The amount of savings you have is also a determining factor.  Who needs long-term care insurance as opposed to using other asset protection planning techniques is always part of the decision making process.  So, in our opinion, the first step to putting together an asset protection strategy is to develop a plan by reviewing all your choices.  Then, and only then can you really be sure your plan will protect your home, savings and heirs.

Ask us for free information on “ASSET PROTECTION FROM NURSING HOMES AND ESTATE RECOVERY LAWS”.