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Wealth Protection and Planning for Retirees – Part 1

Wealth Protection and Planning for Retirees

You Earned It, Invested It, Now Protect It.

Whether you have recently retired or have been enjoying retirement for a while, you and your family should feel good about what you have accomplished. At the same time, there are many important things to consider to protect your family’s future and lifestyle. In our new blog series, we will share our wealth management strategy and a specific approach to help individuals and families successfully navigate retirement.

Since you are no longer in your peak earning years, you need a different approach, a different way of thinking. How can you best protect the wealth you created over the years and best utilize it to maximize what you will have throughout retirement?

Wealth Management Strategy

In our experience working with clients, we have created a wealth management strategy and a specific approach to help individuals and families successfully make that transition and potentially thrive in retirement.

The primary areas we have identified that retirees need to focus on most include the following:

  • Cash Flow Management
  • Establishing a War Chest
  • Implementing Available Tax-Saving Strategies
  • Controlling Risk Using Insurance
  • Properly Planning Your Estate

These are all topics we will cover over the next few months. In each upcoming blog in this series, we will do a deep dive into these important areas, going into detail on what needs to be done to give you and your family the best chance for success in retirement.

To lay the groundwork for our future blogs, today we will give an overview of each area of focus.

Cash Flow Management

If you have made it to retirement, you obviously didn’t get to this milestone without successful planning. However, now that your work income stream has ceased, cash flow management is more important than ever. To try and avoid any surprises in future years, we recommend predicting cash inflows and outflows and projecting a budget all the way out to age 95. The main reason is that you could be in retirement for a third of your life, and your needs and desires will change significantly in that time frame.

As an example, many individuals may have travel expenditures in their budget during the first 10 years of retirement before any possible health issues arise that can limit travel. Later in life, allocating for future healthcare needs is also an important line item as those expenses typically will increase dramatically.

Compounding matters is the constant rise of inflation. The rising cost of groceries, gas, and other basics of life can significantly impact your retirement savings and wealth. During challenging times in the financial markets, large fluctuations in asset values can compound an already complex situation.

Properly estimating your cash flow needs and continually adjusting them based on inflation, life changes, and the performance of the financial markets will help you determine what cash withdrawal strategies are appropriate for your situation.

Establishing a War Chest and Distribution Strategy

Basically, having a war chest is an allocation of cash and bonds, based on your cash flow needs, to act as guardrails to protect you should your financial plan begin to stray off course.

Depending on how large the distributions are from your accounts for living expenses, your war chest may require several years of living expenses to ensure you have enough to weather a decline or period of volatility in the equity markets. Once you have determined the appropriate level of your war chest, you should adjust your portfolio to create the cash and bonds necessary to get you to your number. In addition to making sure that you are managing your cash flow properly and building a war chest, it is also important to optimize your plan using a well-thought-out distribution strategy.

Implementing Available Tax-Saving Strategies

As you look at distribution strategies, you should also review any tax-mitigation techniques available to you.

Taxes can get quite complex, but some examples might include picking the right time to liquidate certain assets, optimizing when and from where you take your retirement income distributions, doing some planning around how you take your required minimum distributions or taking advantage of any tax credits for which you qualify.

In the upcoming blog on tax mitigation techniques, we will do a deep dive into identifying and implementing the available tax strategies most relevant to your situation.

Controlling Risk Using Insurance

Next, we will look at how using insurance can help to control risk. Insurance is one of those things you hope you never need, but when you need it, you really need it. It is important to make sure you aren’t under-insured in the areas that could impact you the most such as home, auto, umbrella policies, and long-term care.

Let’s take long-term care insurance as one example. Skilled nursing and assisted living facilities can cost more than $100,000 for one year of care, with in-home care costing many thousands per year. No one wants to think they will need it, but long-term care insurance can protect your options.

In our upcoming blog on this topic, we’ll help you identify the appropriate levels you should consider for the different types of insurance policies and the strategies for limiting your risk in the most affordable manner.

Properly Planning Your Estate

Finally, we will look at proper estate planning – which is not a one-time thing. When was the last time you reviewed your estate planning documents? Has anything changed that would affect your end-of-life wishes? Has there been a death or divorce in the family? Have you welcomed new grandchildren? Have you purchased new real estate or other assets? Is the named executor of your will living?

It is a good idea to review your estate planning documents on a regular basis. Tax laws also change regularly relating to estate tax exemptions, and these changes are a good thing for you to take note of.

The goal of estate planning is to make sure that your legal documents reflect your wishes, both while living and after your passing. If you’ve had any key family events, make it a point to review your estate planning documents, and if not, still make it a priority to revisit them from time to time. Your legacy counts on it.

In our blog devoted to this topic, we will discuss what to look for when looking at your estate planning documents and how you can make sure that your wishes are what is being implemented.

As you can see, the whole of financial planning is much greater than the sum of its parts. To only address a few things can leave other areas unprotected. Having a multi-pronged approach that covers everything from cash flow and insurance coverage to making sure your important estate documents are up to date provides peace of mind that allows you to enjoy your retirement, and that’s what it’s all about.

Please join us next month when we will focus on cash flow management in detail.

Chris Zeches is a Certified Financial Planner® and Managing partner at Zeches Wealth Management. Zeches Wealth Management has one singular focus: To financial planning and tax expertise to help multi-generational families and business owners achieve more of what they love. If you have a specific question regarding your situation, please contact us.

Have A Question?

If you have questions that are specific to your family’s situation, feel free to contact us and we will do what we can to help.