Planning for retirement and leaving a legacy is a big responsibility now that we are living longer. Deciding if you should keep working, save more or downsize are just a few common issues facing retirees. But, what about retirement planning itself? Here are a few drawbacks and how a financial professional can help you navigate them.
1. Not understanding the source of your advice.
It is crucial to know where you are getting your financial advice and understand the motives behind the person giving the advice. Trust and respect are important factors in deciding which professional they choose. By educating yourself on the options available, you can ensure you find a true financial professional partner in life.
2. Failing to allocate your assets appropriately.
One of the important factors in retirement strategy is allocating assets appropriate to risk tolerance, income needs and legacy desires — yet many people overlook changes that should be made as you near retirement age.
Strategic allocation ensures diversification based on your unique risk tolerance. Diversification is the key to risk management and is a critical component to your overall financial strategy. The simple way of putting this is: Don’t put all your eggs in one basket. It is important to note that diversification cannot guarantee a profit or protect against a loss.
3. Failing to take advantage of stretch options, which provide a greater legacy to your loved ones.
With the Tax Reform Act of 1986, Congress passed a law that allows multi-generational distributions for Individual Retirement Account (IRA) assets 1. Non-spousal beneficiaries must generally take distributions from their inherited IRAs, whether transferred or not, within five years after the death of the IRA owner. But an exception to this rule applies if the beneficiary elects to take distributions over his or her lifetime, often referred to as “stretching” the IRA. You can stretch IRA distributions throughout yours, your children’s and your grandchildren’s lifetimes.
4. Failing to prepare for legacy planning.
When planning your legacy, some good questions to ask yourself include:
Are your beneficiary forms up to date?
Do you know where your important documents are located?
Do you have primary and contingent beneficiaries?
Do you know what benefits are available to you from the Social Security Administration?
Have you initiated important estate planning documents?
Does your plan allow for a multi-generational payout?
If there is one rule more important than any other when it comes to legacy planning, it is this: Your beneficiary designation forms control how your assets are distributed, so you need to keep those forms up to date. This is true for retirement plans, annuities, life insurance, and other non-probate assets. You need to review the beneficiary designations at least every couple of years or when there is a major life event.
Retirement planning is the single most effective way to secure your future and your legacy. We are more than happy to answer any questions you might have about planning for retirement.