5 retirement-planning items you should take care of now
February 27, 2015 by Melody Juge
I am amazed at how many people I meet who haven’t prepared properly for their retirement, a time of life when you will go without earned income — potentially for decades.
Whether you are your own financial adviser, embarking on this project alone or you have procured the help of a professional adviser, there are numerous considerations you will need to address. All of them will take time to think through and give due consideration before making final decisions.
Here are five important issues, often over looked, which will require your attention during your pre-planning:
1. Housing
When you retire, will you continue to live in the residence you’re living in now? Take into consideration the expense of ongoing maintenance and repair of your current residential property along with the possible increase in property taxes over the next 10 to 40 years. If you think you will be downsizing during retirement, what will your cost of relocating be? Be sure to be detailed regarding expenses for a possible future move.
I have clients that live in a spectacular two-story home, it is as beautiful as a piece of jewelry. They are still young, in their mid-60s, however the wife has a serious medical condition that will eventually require her to be in a one level living environment, so a move will be mandatory. The big question now is: Do they continue to enjoy their residential treasure and wait for another five to 10 years to move or do they make the move now, while they still have the ability to be fluid in their daily activities? Do you have health issues that need to be considered, which would make moving necessary, sooner than later?
2. Age appropriate investing
When you started investing decades ago, if you were like most of us, you probably were willing to take more risk for a potential higher return. Now that you’re reviewing your investment portfolio with retirement in mind, ask yourself if your risk profile is still suitable for you at your current age. Be reminded here that making up extreme market losses takes time.
On the other side of risk, being overly conservative can hurt you. I have met many people who have all (and I mean all) of their money in annuities. I recently worked with a couple who had over $850,000 in three contracts with the same insurance carrier written on the same date, in a state where the limits set by the State Guaranty Association were $300,000 per person, per insurance carrier. The insurance agent never mentioned that the contracts had to be annuitized at the end of 10 years.
Reminder: Fixed annuities, [fixed indexed] annuities and hybrid annuities aren’t investments. They’re insurance products, and as is the nature of insurance products, they are designed to transfer risk away from the consumer and place it with the insurance carrier. The gains within the contract come from a declared interest rate, a choice of crediting methods or riders, offered and purchased for accelerated income benefits.
