Do I need a retirement plan?Submitted by Everest Retirement Planners on September 25th, 2019
By Randy Deaton
Take a moment, relax, close your eyes (well…read the blog first) and imagine walking out the front door of your employer for the last time. Box in hand filled with personal items; you’ve just completed a career. Retired! Work’s now just a memory. A lifetime of long hours and sacrifices…time away from important things like family. But that’s looking back. What’s ahead? What does the future hold? Will it be ‘golden years’…or uncertain years? What’s the plan? Do you have a plan? Do you need a plan? Well…it just depends.
With your eyes still closed think about this. A few years have passed. You’re now fully in retirement mode. You find yourself spending uninterrupted time with the ones you love, supporting them in ways you never imagined. Travel? You’re regularly going places you’ve only dreamed of. Most importantly, you have this knowing confidence you’ll have the financial resources to live this lifestyle for the rest of your life. You also know without question you will never be a financial burden on your children. And eventually, when the end nears you will be comforted knowing your spouse will have the resources to continue the life you’ve both enjoyed.
Reality and the Risks
Ok…open your eyes. Let’s think about reality. Can someone have this kind of retirement? Absolutely and many do! But what about the risks that could destroy this hope, risks like market losses, longevity risk, health care risk, and long-term care risk. The bad news is financial risk in retirement is significant, but the good news is the risks are identifiable and few.
In addition to risk, what kind of taxes will you pay? We know that income in retirement will come from Social Security, maybe a pension, and your own retirement savings. Did you know that these income sources can each be taxed differently? Careful consideration as to when and how you elect to receive this income will likely impact the taxes you will pay for the rest of your life.
What about your legacy? Passing on wealth to family or favorite charities may be important or maybe not, but in either case upon your passing wouldn’t you want your gifts to be transferred with minimal fees & taxes? Also, wouldn’t you prefer to eliminate the probate process for heirs? Certainly by taking no action, fees and time delays on estate transfers are inevitable. Trust me, if you don’t have a plan for your estate transfer at death the government does! The elimination of taxes, fees and time delays can be accomplished with a plan.
So what if you had a comprehensive plan designed so that your financial assets were protected from market losses, health care & long-term care expenses and liability risk. Your plan was designed so the income you enjoy would never end even if you happened to outlive your money. Also, the plan addressed taxation by drawing on income sources in a way that would minimize the taxes paid each year. Additionally, it provided clear direction as to needed estate-planning documents like a will, durable power of attorney and a living will, and upon death an asset transfer that would minimize expenses and time delays for beneficiaries. Wouldn’t you agree such a plan could provide confidence and avoid anxiety throughout retirement?
Consider the Alternative…
Yogi Berra, former New York Yankees catcher once said, “If you don’t know where you are going you’ll end up some place else.” Without a plan you will end up some place else, but is it where you want to be? Maybe, but maybe not. One thing is clear, there are no do-over's in retirement …a mulligan on the golf course, sure, but if we make a financial mistake in retirement there is no paycheck to fall-back on. One mistake or one simple oversight could change the trajectory of your retirement. Will you find yourself years down the road knocking on your children’s door seeking financial assistance? Is that what you want? Of course not.
Without a plan it’s possible you might have a wonderful retirement. Certainly, many people in retirement are loving life and have never considered a plan. Unfortunately, some have little retirement savings and are primarily living off of Social Security. Without much at risk one could argue a retirement plan isn’t necessary. That said, you only have one shot at retirement.
If you have financial assets and are interested in optimization and protection a comprehensive plan makes sense. The time and resources you put into planning will be more than offset by the confidence and peace of mind created by a plan.
Many of us spend more time planning for a week’s vacation than we do for our own twenty to thirty-year retirement. Wouldn’t it be better to be proactive than reactive? Alexander Graham Bell once said “Before anything else, preparation is the key to success.” The same could be said about planning for retirement.