The 3 “Must Dos” of Your Transition to Retirement

Sure, with consistent saving and investing (and a truckload of luck), your retirement could turn out straightforward. But I’m sorry to say that, more often than not, great retirements are becoming less about the money you’ve saved, and more about the money you keep.

That’s because there are facets of retirement that are ancillary to saving. That is, they’re about your fight to keep your assets where they belong.

(And they belong with you, of course.)

If you want to stay in possession of your hard-earned wealth, and your legacy, and limit needless headaches and expenses, these are three of the things you have to do.

1. Get a masterful accountant.

No one except an expert in tax law should guide your tax planning. I’m here to point you in that direction because I’m a serious advocate for all the good they can do.

That’s because rarely does a week goes by that we don’t meet with someone who’s paid 1000s of extra dollars in taxes or fees to either the federal or their state government. Just to clarify, I’m not talking about dodgy, “shell game” loopholes for billionaires. I’m referring to people with assets of perhaps $700,000 who have paid $30,000 more than they should have. And all simply because they didn’t engage in pre-emptive tax planning.

Briefly, the accounts you use to derive your retirement income, along with the order in which the money is withdrawn, the timing and, last but not least, the amounts of these withdrawals, those transactions are not created equal.

Want proof? According to the US Government Printing Office, the tax code is now 16,845 pages long. (You can order your copy for $179. ^[1]) Simply, if the United States Government cares that much, you probably should, too.

Think of it this way: In today’s low-interest rate environment, a reasonable investment strategy might result in returns of 4 percent. Now, consider that a great tax strategy can actually be 10 or even 20 percent more advantageous to your bottom line.

Saving that money was difficult. Keeping it shouldn’t be. When it comes to tax planning, you should:

Consider converting your 401(k) to a Roth IRA if you believe you might be in a higher tax bracket in the future.

2. Estate planning keeps families happy.

Do you know that the beneficiaries on your retirement accounts, that is, the person you have listed as the recipient of the money saved in your 401(k) or IRA (in the event of your death), supersede the beneficiaries you have listed in your will?

Everyone needs to know this.

Just two weeks ago we met with a new client who is terminally ill. This person is young, has been married to her 2nd husband for almost 20 years, has almost $1 million in her 401(k), and has accumulated numerous other assets.

She also had what she believed to be an “air tight” will.

Not so fast. We had her check the beneficiary on her 401(k), and guess what? Her first husband was still the designee.

She hadn’t spoken to him since 1995.

Once the beneficiaries on your retirement accounts are in line with your wishes, then a will is vital to help you avoid expensive and time-consuming probate.

When it comes to estate planning, you should:

• Check the beneficiaries on your retirement accounts today.
• Meet with an estate planning attorney and have a will drawn up to help protect your family from expensive and time-consuming probate.

3. Insurance: that thing we hate until we love it.

We typically don’t sell insurance, but we recommend it. We recommend it because it’s the world we live in, and that world requires comprehensive risk management assessments. Simply, if you’ve accumulated assets, you need to protect them. It could be that you need an umbrella policy, it could be that you need life insurance, or it could be that you are carrying too much insurance.

But how do you know?

One of the biggest problems with insurance might just be that there are often big sales commissions associated with the transactions. That’s a potential conflict you need to work to avoid. So here’s one way to help minimize the risk that you are being given bad advice: work with an advisor who doesn’t sell insurance, but can make recommendations for the amount and types of insurance that you need so you are well informed before meeting with a salesperson.

When it comes to insurance and protecting your assets, you should:

• Consider an umbrella policy. They’re more affordable than you might realize.
• Consider dumping your life insurance. If your kids are grown and you are no longer working, it might be an unnecessary expense.

Conclusion

As with tax planning and estate planning, insurance is almost entirely preemptive. That is, you buy it before you actually need it. Unfortunately, that means that tax planning, estate planning and insurance planning are all facets of retirement preparation that are easy to put off or ignore. If you’d like more information about these important topics, read my book, Personal Decision Points.

[1] US Government Printing Office (www.gpo.gov ), you can order a complete set of Title 26 of the US Code of Federal Regulations