Your retirement plan needs to take a holistic approach. Because there are so many decisions to make, it’s easy to get lost in the weeds. Follow these six signposts from Kiplinger online to find your way.
1. Develop an income plan detailing exactly how much income you will need each year to fund your retirement lifestyle
Before skipping over this you should consider that your lifestyle will change — along with your tax situation — which means that the amount you need now to live on will not be the same when you retire. You may need to budget even more for your early years of retirement, when you’ll be enjoying the good life. So, it is not a good idea to make general assumptions about your future income needs based on how things are while you’re working.
2. Identify your income sources and determine exactly how much income will be generated from each source to satisfy your annual income needs
Don’t generalize – seek to know exactly how much you can expect from each resource you have.
3. Map your assets out and separate them by their purpose
In most instances, the assets you have are either going to be spent or used for income now or in the future. So, a good place to begin would be identifying which assets fall into these categories.
4. Have an income replacement plan in place for your spouse to cover the loss of Social Security or pension income if you were to predecease them
Developing an income strategy for retirement most often means you are relying on a husband and wife’s benefits, but those benefits are only received while both are living (in most cases). It is a good idea to know the specifics for how benefits will adjust when a death occurs and have a plan in place to replace lost income if it is needed.
5. Have (updated) legal documents in place designating financial power of attorney, medical directives, wills and trusts
The bottom line with this tip is, don’t wait until you need the documents to create them. It will be too late.
6. Have a contingency plan in place to cover health care costs if you were to find yourself needing long-term nursing care
This is an area that so many people ignore. However, considering the cost of nursing care, it is not something to ignore. You need to know how this cost will be covered if you find yourself needing care.
The cheapest way to cover this risk is through insurance, but some may choose to spend down a portion of their assets to cover the costs. Either way, it is a good idea to have this mapped out and know how you plan to cover the cost if incurred.
