Even if retirement lies several years ahead, it is prudent to begin gathering information, evaluating options, and devising a tax and investment strategy. Here are several recommendations to help structure your retirement planning:
- Familiarize yourself with Social Security and Medicare benefits. Reduced Social Security benefits become accessible after age 62, with full benefits available upon reaching the “normal retirement age,” which depends on your birth year. Apply for Social Security through your local office or online at http://www.ssa.gov a few months prior to your intended retirement date. Medicare benefits, covering a significant portion of healthcare costs, can be obtained at age 65. For coverage information and the application process, call 1-800-MEDICARE or visit http://www.medicare.gov.
- Inquire about employer-provided health benefits. While Medicare is relatively comprehensive, it may leave coverage gaps that need addressing. Some employers offer supplemental health insurance plans or group rates to bridge this gap.
- Investigate retirement benefits. Determine whether you will receive regular fixed payments or have the option to collect your benefits as a lump sum. If opting for a lump sum, decide whether to keep the money and pay taxes immediately or establish a Rollover IRA. Limited tax breaks apply to payouts, and ordinary income tax rates may apply. With a Rollover IRA, you can defer taxes on income earned in the account until required withdrawals begin at age 72.
- Formulate an investment strategy. Retirement planning typically emphasizes reducing risk and enhancing income. However, few investments are risk-free. Rising living costs can render even fixed-income investments retrospectively risky. Tailor your investments to your financial situation and tax outlook.
- Decide on investment management. Your background and preferences will dictate the optimal approach to managing your assets. You may enjoy monitoring your portfolio during your newfound leisure time or prefer to entrust a professional investment manager while you travel or pursue new interests. Alternatively, consider seeking a “second opinion” from a trust officer who can outline various options.manager. Perhaps you want to do it yourself but would like a “second opinion.” A trust officer can explain the many choices available.
- Prepare for unforeseen circumstances. Considerations beyond portfolio management, such as disability or prolonged illness, should be addressed. A trust officer can provide information on living trusts—a comprehensive, long-term investment plan that helps mitigate these concerns.
- Identify opportunities to increase retirement capital. In the years leading up to retirement, when earning power is typically at its peak, maximize contributions to tax-deferred retirement plans like IRAs or 401(k) plans.
- Conduct a “dress rehearsal” for retirement. Estimate your monthly income and expenses, adjusting as needed. Then, attempt to live for a month on your projected retirement budget.
While financial planning is essential, it is not the only aspect of retirement to consider. Explore potential relocation, travel plans, or new hobbies to enrich your retirement experience. Ensuring your financial future is secure will enhance your enjoyment of retirement. The team of professionals at Legacy Private Trust Company stands ready to help you safeguard your financial future throughout your retirement. Visit our Retirement Planning page for more information.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or email@example.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.