Once you hit your fifties or early sixties, you might feel as though you’re approaching the finish line of a marathon. It can be tempting to hurry up and retire. But since no major financial decision should ever be rushed, remember to ask yourself these four questions before making the leap into retirement.
What is my withdrawal strategy? You know that your retirement income will consist of regular withdrawals from your retirement plan. But have you made a concrete plan for those withdrawals? Have you considered the tax status of various accounts? What about inflation or increasing expenses such as out-of-pocket medical bills and long-term nursing care? You might want to structure your withdrawals so that they gradually increase or decrease, depending upon your needs. You should also consider other ways to manage future expenses, such as long-term care insurance.
What is my real tolerance for risk? We often select riskier investments early in our careers, because we’re attracted to the potential for a larger payoff. When we’re young, we know that we have plenty of time to make up for mistakes. But as you enter retirement, do you want to continue risking your principal? Do you have a rainy day fund in case of losses? Reassess your tolerance for risk, and be honest with yourself.
What about my estate plan? Have you chosen a beneficiary for your assets? What about establishing a living will or granting someone power of attorney? Most of us experience at least one serious health crises at some point in retirement, and you don’t want to make hasty decisions when you’re sick or disabled. Meet with an estate planning attorney now, and make the decisions that will best protect your assets in the event of your death or incapacity.
How will I spend my retirement? You probably have an idea of how you want to spend your retirement. At the top of your list might be rest and relaxation! But the happiest retirees are actually the ones who stay busy. You can always reduce your activity level if you decide life feels too hectic, but under-planning can lead to boredom and depression. Make sure you have a solid idea of how you want to spend your days.
For more help with financial planning at this important time, contact our office to schedule an appointment. We can help you decide if you’re ready to retire.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
Stock investing involves risk including loss of principal.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
Asset allocation does not ensure a profit or protect against a loss.’
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