Retirement Planning: Getting Your Financial “Ducks” In a Row

“Get your ducks in a row” is an old expression about becoming more organized to ensure your affairs or matters are in order before proceeding with a task or project. Or, in the case of your retirement years, getting your affairs for the rest of your life. What could be more important than that?  

Planning for retirement is essential. You’ve spent years or decades accumulating assets to provide a comfortable, secure lifestyle during your retirement years. Retiring without a comprehensive financial plan may risk your hard work and discipline.

In this blog, we’ll talk about three important retirement planning steps you should take now to start getting your retirement ducks in a row:

• Develop a realistic budget that details all of your income and expenses that will need to be accounted for once you are retired
• Have all of the various legal documents for your estate in order and stored in a safe place
• Ensure you have all of the proper insurance coverage for all of the risks that will impact you and your spouse during your retirement years

Are you starting to think about retirement? Read our popular Quick Guide, “Retire at Any Age: Advice from a Financial Advisor in Buffalo Grove.”

Be Realistic 

Developing a realistic budget that includes all your planned (and lesser planned) post-retirement expenses should ideally be completed before you retire. Why? Knowing your expected expenses and income can help ensure you don’t outlive your savings. Remember, retirement can last several decades, and much can happen during that extensive period.

A realistic retirement budget can help determine if you’re financially ready to retire or need to work a few more years (full or part-time) to achieve your desired retirement lifestyle.

If there’s a gap between your anticipated income (from pension plans, investment accounts, Social Security, etc.) and your expenses, identify these as soon as possible and make the necessary adjustments.

Most importantly, your retirement budget can influence your investment strategy. For example, you might choose less risky investments if you have more than enough to cover your needs during your lifetime. Conversely, if you fall short, the sooner you take action to boost your returns, the better. However, ensuring you aren’t taking too much risk in the years leading up to your retirement is also important. You need time in the market to make up for any potential losses, so if you take too much risk right before you retire you could face large problems.

Retirement can come with unexpected costs, for example, medical or other catastrophic events. A well-thought-out budget anticipates contingencies, helping to ensure you are prepared for any situation – expected or unexpected. Financial uncertainties can be a significant source of stress. Knowing you have a plan and understanding the benefits of contingency planning can provide you with more reassurance. 

Your retirement lifestyle – whether traveling the world, starting new hobbies, or moving to a new first or second home – should align with your financial capability to fund these lifestyle benefits. A budget helps clarify what’s feasible.

Deciding when you should start taking Social Security or how to handle your pension can be influenced by your budget. For instance, delaying Social Security can result in higher monthly benefits, which might be beneficial depending on your budgetary requirements and other income sources.

Get Your Estate in Order

Having an estate plan can provide clarity, protection, and efficiency for the transition of assets and decision-making upon your death or incapacitation. It’s essential to ensure your wishes are honored and your loved ones are cared for the way you intended.  

An estate plan impacts how your assets will be distributed upon your death. Without an estate plan, the distribution will be determined by state intestacy laws, which may not align with your actual wishes.

Proper estate planning can also help reduce the inheritance tax due when the surviving spouse dies. This helps ensure that a more significant portion of your estate goes to your heirs and organizations you care about versus the U.S. Treasury. 

If you have minor children or dependents, an estate plan allows you to designate guardians for them in the event of your premature death. Without this provision, the courts will decide on their guardianship, which may not be the ideal situation for your family.

Without legal documents, probate can be a long, public, and potentially expensive legal process where a court decides how your estate will be distributed. A well-crafted estate plan, especially with tools like revocable living trusts, can help your beneficiaries avoid probate, saving them time and money.

Remember that an estate plan isn’t just about assets. It can also include directives about what should happen if you become incapacitated and can’t make decisions for yourself. This can encompass financial powers of attorney, health care proxies, or living wills.

An estate plan can also ensure a smooth management and ownership transition if you own a business. Proper planning allows the business to avoid operational challenges or disputes among heirs.

Knowing that your affairs are in order can give you the confidence that your loved ones will be provided for upon death or incapacitation.

If you’re inclined to give a portion of your estate to charity, an estate plan can facilitate that wish and potentially provide tax benefits.

Retirement can bring about various unforeseen financial challenges. An estate plan can ensure that liabilities such as outstanding debts or long-term care costs are accounted for during your and your spouse’s lifetimes.

An estate plan should not be a “set it and forget it” document. It should be revisited periodically, mainly as significant life changes occur (e.g., divorce, inheritance, loss of a spouse, etc.). Completing the process before retirement allows you to adjust as these changes occur.

Have Proper Insurance Coverage

You can take various insurance-related tactics to ensure you have the correct coverage as you move into retirement.  

1. As we age, specific life insurance policies often outlive their original purpose. For example, your children are now grown and financially independent, so life insurance policies on them are no longer necessary. If this is the case, selling these insurance policies could be beneficial. This process is known as a life settlement.  

Selling your policy can provide a significant sum, which can be reinvested or used to cover medical expenses, pay off debts, or fund a dream vacation. However, this decision is also not a one-size-fits-all. Be sure to consult with a financial professional before making this decision.

2. Another way to get your financial ducks in a row for retirement is to consider investing in long-term care (LTC) and medical insurance. Having the right medical coverage can help protect your hard-earned savings against rising healthcare costs.  

Long-term care insurance addresses the what-ifs when you or your spouse requires extended health care outside of a hospital. This insurance can cover the costs of services like home health care, adult day care, assisted living, or nursing home care. These services are often expensive, and without LTC insurance, the burden could fall heavily on your savings.

LTC and medical insurance allow you to leave a financial legacy or maintain a particular lifestyle without fearing that unexpected health costs will wipe out your assets.

The Benefits of Working with a Buffalo Grove CERTIFIED FINANCIAL PLANNER™

As discussed in this article, retirement planning is often a complex process that requires specialized skills. This is where the knowledge, advice, and services of a retirement planning specialist in Buffalo Grove can come into play.  

The SGL Financial team is focused on your needs, concerns, and goals. As financial fiduciaries, we always act in your best interests, putting your needs first. We take a holistic approach to crafting personalized wealth management solutions. We don’t believe in using cookie-cutter models because every client has different needs and goals.

We also can provide planning, tax, and investment advice, so we are a one-stop shop for all your financial needs during working, transition, and retirement years.

If you need help getting your financial ducks in a row for retirement, we’d be honored to talk with you about your needs.