Retirement Tools Part 3: Protect Your Assets

You’ve saved your money and grown your money – now there is just one final crucial step to the retirement planning process: protect your assets.

You need to create a plan to ensure that you and your loved ones are set up for financial success after you stop receiving an income. Easy, right? 

Not necessarily – planning for risk can be tough, especially if you’re unsure of what life could look like decades down the road. How do you even know where to begin?

There is always uncertainty in life, and you don’t always know what’s coming – but planning for all those what-ifs ahead of time can help ease the burden down the road and set you and your family up for long-term financial success.

Insuring Against Risk

One of the best ways to control risk in your retirement planning is to insure against it. 

Insurance is an important part of retirement planning, from life insurance to health insurance and even long-term care insurance. You want to make sure you and your loved ones are prepared for anything and everything, especially if multiple people are relying on your income. 

Speak with your advisor to create a long-term plan for what you would like to happen in regards to these plans in the future.  They can help you decide what might be the best option for you.

Estate Planning

Another great way to protect your assets is to incorporate estate planning into the process. 

Estate planning helps to make sure your assets go where you want them to.  A great starting point for estate planning is to establish a will or trust, so your loved ones are taken care of after you’re gone. You can always update them if things change.  But start now. You don’t want your kids to fight over assets or end up making the executor’s life harder than it should be, right?

It’s all about easing the burden for your loved ones to make the grieving process easier and to prevent any potential disputes over what you would have wanted. 

There are other things that don’t involve a lawyer.  Like a family love letter.  This is a letter you write to your loved ones explaining what they meant to you and why you built your estate plan the way you did.  You can also include where documents are, how to access them if you have passwords, and also details on what you would want if you go into a hospital or nursing care. Are there things you want with you (laptop, iPad, a favorite picture, family album….).  There is a website with a notebook called, a great resource to begin doing this.

5 Strategies to Protect Your Retirement Plan

Beyond insurance and estate planning, there are several strategies you can employ to protect your assets:

1. Roth Conversions

A Roth conversion occurs when you transfer funds from a traditional retirement account to a Roth account. While you have to pay taxes on that money at the time of the transfer, the benefit from a Roth conversion is that the money you transferred is eligible for tax-free withdrawals in retirement. We recommend them when you have room in your tax bracket (each dollar converted doesn’t put you into next bracket).  But each situation is different so we recommend a check on where you are.

You may be able to optimize your assets by taking advantage of the different tax treatments a Roth account offers by rolling over some of your IRA savings. A Roth IRA is also the best vehicle to transfer assets at death to children.  They do not owe any taxes if they inherit a Roth IRA and withdraw the money.

2. Optimizing Social Security

The timing of Social Security is important – depending on when you file for benefits, you may receive more or less money each month. Likewise, the timing of when your spouse begins to collect their benefits could affect how much you receive. Widowed and divorced spouses also have some decisions to make as well.

It’s worth your while to explore the options available and optimize your Social Security benefits to best support your retirement.

3. Tax-Efficient Distribution Plans

Because you’ve saved money for retirement, you likely have assets stored in a variety of places, such as investments or IRA accounts, each with their own unique tax considerations.

A question often asked is where is the best place to withdraw money first?  As you begin to pull money from those different sources, a financial advisor can help you create a tax-efficient strategy, effectively lowering your taxes and increasing the amount of income you can expect each month.

4. Succession Planning

This step is especially important for business owners. 

After you retire or pass away, you want to have an efficient plan for how you would want your business to continue on. Who will own the business? Who will take over your duties? With employees, clients, and loved ones relying on your business for products, services, and income, it’s imperative that the company is set up for success in your absence. 

We recommend that you make these important decisions sooner rather than later, while also maintaining flexibility to change course along the way if necessary.

There could be sizable tax responsibilities if you sell it all at once, or a loss in value of the business if you’re gone and you don’t have a succession plan.

5. Spending Guardrails

Once you hit retirement, your accounts now become your income. After all, you’re now using those funds to live off of, rather than a steady income stream from a job. Creating guardrails around your spending in retirement can help ensure you’re set up for the long-term. 

You want to create spending goals that will allow you to enjoy your retirement, while also balancing the needs of the Future You. 

This can be tricky – you don’t know exactly how long your retirement will last, or how the market will perform in the future. The key is to create a cash flow management strategy that balances your current needs with your potential needs down the road.  An advisor can help navigate that road with you, we consider us as your thinking partner!

Protect Your Retirement

Are you ready to create a long-term retirement plan that works for all your what-ifs? Click here to connect with the Clarity Wealth Development team today and get started crafting the retirement plan of your dreams. 

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