Am I Going to Be OK in Retirement? Yes, With Focus on 5 Key Areas

All it takes is protecting what you save, having an income plan, knowing your health care options, reducing your tax burden, and making an estate plan.

Planning for retirement is actually pretty simple. Just answer the question in the headline above with a resounding “Yes!” and you’re good to go. The problem is most people can’t do that. There’s always that little question mark at the end. It should really be called the “uncertain mark,” don’t you think?

Answering this question is actually very difficult. It requires asking about new obstacles you didn’t face while working, such as: Did I save enough money? Will I run out of money? When do I start Social Security? Which Medicare plans are best? How would I pay for long-term care? Should I pay off the mortgage? How do I take required minimum distributions (RMDs)? Should I take my pension in payments or a lump sum?

The list goes on and on.

So, how do you know for certain that you’ll be OK in retirement? I think I can help. I’ve scoured over 70 years of retirement research, identified risks in retirement, and categorized them into five key areas to focus on. I call it our Smiling Through Retirement Process©.

1. Protect What You’ve Saved.

Being retired means you aren’t saving anymore. You’re spending. And when you spend and lose money, bad things happen. For example, if you saved $1 million and need $50,000 a year in income, that’s 5%. If you lose 50%, you now have $500,000, but still, need $50,000 a year. That’s not 5% anymore. It’s 10%. That’s too much, and you’ll most likely run out of money.

Safety with reasonable returns wins every time.

2. Have an Income Plan.

You need to know that you will never run out of money. To do that, you must have a detailed, all-inclusive income plan. It needs to provide certainty that you will never run out of money, no matter how long you live.

3. Work Out Health Care Options, Including Medicare and Long-Term Care.

Get your Medicare right, and you’re golden. Get it wrong, and you’ll forever pay too much and may not get the level of care you need.

Americans who turned 65 in 2021 have an 83% chance(opens in new tab) of needing some type of long-term care before they pass away. Not covering this risk is the fastest way to tank your retirement goals. There are several ways to cover this risk, not just one. And it can be covered at low or no cost.

If you don’t use it, you don’t lose it. And if you can’t medically qualify, there’s a way to cover this risk, too.

4. Reduce Taxes You Owe.

Paying too much in taxes in retirement is enemy No. 1. Who owns your 401(k) or IRA account? Did you say you do? Not quite. Meet your partners, the IRS, and your state government (if you pay state income taxes where you live). Additionally, if taxes go up, they own more, and you own less.

Speaking of your tax-deferred money, do you think you’ll be in a lower tax bracket come retirement? Again, not quite. When you pull that money out (which you are forced to do with required minimum distributions), you will be in the same or higher tax bracket than your working years.

But there’s good news. You can fix this problem. Fixing it means you will pay fewer taxes in retirement, have more money to spend, and leave more money to your kids, mostly tax-free!

5. Put Together an Estate Plan.

Everybody needs an estate plan, whether or not you have lots of assets. An estate plan controls things that happen if you become disabled or die.

If your disability is long-term — and you don’t have an estate plan, or you have an improperly designed estate plan — the person you name to take care of your money can use your money only for you. So, if it’s your spouse, they cannot use your money for themselves, your kids, or anything else. If they do, they can be removed and replaced with an attorney. Your family would pay big, unnecessary legal fees.

If you don’t have an estate plan, or it’s improperly designed, your money can end up in the wrong people’s hands. For example, if your kid gets divorced, half of the money you left for them and your grandkids will most likely go to their ex-spouse. Or, if your kid is at fault in a serious car accident and is sued, all your money could go to the victim’s family.

These terrible situations, and many others, can be avoided with a properly designed and implemented estate plan.

If you address each of the above areas going into retirement, you have done everything possible to ensure you’ll be OK for the rest of your life. Seeking guidance from a qualified financial professional and estate attorney is a great place to start.

Here’s to you living a Happily Ever After Retirement©!

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