By Brian Bloxom, ChFEBC℠
Many Americans spend the greater part of their adulthood planning and saving for retirement, the significant milestone they’ve eyed for decades. However, that doesn’t tell the whole story. Retirement is more than just a new phase of life. It’s a major shift in how you live, think, plan, and spend.
As a financial advisor, I’ve tried my best to prepare my clients for what should be a rewarding phase of their lives. However, certain aspects of retirement can still be elusive or misinterpreted.
Here are five areas that could use a little more attention before retirement.
1. Financial Emergencies Can Be Stressful
Most retirees live on a lower income. This means that unexpected expenses (car or home repairs, medical procedures, and family emergencies) can take a bite out of your budget. Even those with more funds can find it stressful if they lack sufficient liquid assets. Withdrawing from a retirement account is also distressing when the market is suffering a downturn.
It’s smart to set up an emergency fund completely separate from any of your other retirement savings. Most advisors recommend having at least three to six months’ worth of living expenses. If you can afford to set aside even more, you could build a good cushion.
2. Not All Healthcare Expenses Are Covered in Retirement
Notable gaps in Medicare coverage include vision, dental work, hearing aids, and long-term care. The amount retirees have to spend out of pocket can be a shock—often they are responsible for items like prescription drugs and specialist co-pays.
As you age, you generally rely more on long-term care insurance. The longer you procrastinate in arranging it, the more expensive these healthcare costs become. Set aside a sufficient budget for the healthcare needs that Medicare doesn’t handle. If you’re still working, shop for supplemental and long-term care coverage.
3. Starting Small Is Okay; You Can Catch Up
When you are in your prime working years (say, your 30s or 40s), retirement can still seem like a distant prospect. Many people raise families during those years and have to spend money on their children on top of long-term expenses like mortgages. This often causes people to not max out annual contributions to their IRAs or 401(k) plans. While that’s a suboptimal choice, it’s far from the end of the world.
Even a small increase in contributions after you turn 40 can make a big difference down the road. If you’re over 50, you can make catch-up contributions to your plans in excess of annual limits. It’s never too late to start.
4. Begin Estate Planning Right Away
Estate planning is important for all retirees, not just the very wealthy. Wills, healthcare directives, and powers of attorney are just as important to strategize for as investments. Leaving estate planning aside for too long can cause tax disadvantages, uncertainty, and family rifts.
To promote unity and solidarity among your heirs, make estate planning a central part of your overall retirement strategy. This is another area where a financial advisor can be of great use.
5. Remember That Money Changes After You Retire
Your relationship with money changes drastically in retirement. After spending years accumulating wealth, your focus in retirement is preserving and taking distributions from it. It’s a whole new ball game.
Good practice concerning your retirement fund includes not taking distributions too soon and making sure you’re withdrawing from the correct accounts in the right sequence. Withdrawing from taxable accounts first, 401(k)s and traditional IRAs next, and Roth accounts last could result in a significant tax advantage.
Guidance Toward a Fruitful Retirement
Retirement has its own set of challenges. But they can be managed and conquered with the right support. At Sentinel Wealth Partners, we help many clients who are either retired, on the cusp, or still contributing to their retirement funds. When clients contact us, we offer a full slate of services to optimize their financial standing for generations to come.
Reach out to us today by calling our office at 703-832-0164, sending an email to [email protected], or using our online calendar.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits Consultant℠ (ChFEBC℠) and Chartered Retirement Planning Counselor℠, CRPC® professional with 25 years of experience in financial advising. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety. When he’s not working, you can find Brian spending time with his wife, Jessica, and their two sons, Spencer and Preston. He enjoys coaching soccer, serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Sentinel Wealth Partners and Cambridge are not affiliated. Sentinel Wealth Partners is not engaged in the securities business. Cambridge does not offer tax or legal advice.
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