Retire Well

Ahhhh, retirement: It's what you've worked, saved, and planned for all these years. Now that it's approaching, have you thought through all the steps you need to take to transition into retirement? Here are three major planning areas:

1. Turning savings into income. To start your next chapter in life with comfort and confidence, you'll need to create a plan to turn the money you've saved into a steady stream of income.
2. Timing your Social Security benefits. You're eligible at 62, but when should you start collecting Social Security? While there is no one-size-fits all answer, waiting could potentially increase your retirement income.
3. Planning for health care costs. This is a biggie - and often underestimated. Our 2020 health care costs study¹ estimates that a couple retiring in 2020 at age 65 may need current savings of at least $295,000 to supplement Medicare and cover their out-of-pocket health care costs in retirement. Consider how much health care will cost you, how much Medicare will cover, and how you will bridge the gap.

Retirement is a very personal experience, built on your own specific needs and aspirations. Building a retirement plan that works for you starts with one exercise: understanding your future needs and expenses to see how much income you'll need.

To put you on the right path, start by estimating your needs in these three key areas:

• Essential expenses - Just as in your working years, you'll need income to pay for "must-­haves" like food, utilities, health care and insurance, and housing. You may want to consider a reliable and steady source of income to cover these types of expenses.
• Emergency needs - There are rainy days even in retirement. Set aside some cash so that if an accident, emergency, or other unexpected event arises you won't have to cover the costs with credit cards alone.
• Discretionary spending - How will you spend retirement? Enjoying a favorite hobby? Traveling? Spoiling the grandkids? Since these "nice-to-have" expenses are variable, consider covering them by making as-needed withdrawals from your investment portfolio, which may include stocks, bonds, and mutual funds. In the meantime, until expenses arise, simply leave your investments to potentially grow, giving yourself a greater opportunity to build assets you'll need for 30 years or more in retirement.

Once you identify your needs, determine a personal plan for generating income (see next tab, "Generating Enough Income"). 

If you're like many people, you reach retirement with a mix of investments and accounts. So how do you transition what you've saved into an income-generating retirement portfolio that has the potential to last as long as you do?

Like a blueprint to a new house or a recipe for a new dish, a retirement income plan can help you determine how you might use your financial resources to generate income to last the rest of your life. It will help you make decisions about your savings strategies, how long you should continue to work, and when to tap various retirement resources to maximize income potential. There are 4 steps to creating a retirement income plan. 

1. Take an inventory of expenses and income sources.
2. Align your resources so that first they cover your essential expenses.
3. Fund discretionary expenses after your essential expenses are covered; and,
4. Review your plan regularly.

Going through this process can be quite empowering. The result is that you get a good look at how ready you might be to cover the financial side of your retirement.

You've opened a world of possibilities for your retirement by saving and investing for years. Today, with your goals in sight, your efforts have also opened another opportunity: the ability to ensure the loved ones and organizations near to your heart are taken care of today and in the future. Here are three steps to take to help ensure you leave the legacy you desire:

• Determine what you'll give and to whom. To properly fulfill your personal wishes, start by listing the people, organizations, or life events you want to support - be it friends, family, charities, a college education - to ensure nothing's overlooked.
• Name your beneficiaries. Beneficiary is the legal term for someone who will inherit assets from you upon your passing. Name beneficiaries for your accounts online (if available in your plan) or by phone.
• Gift assets today. Gifting allows you - and others - to benefit from your generosity immediately. By gifting assets to family or charity, you will not only help those you care about, you may also enjoy immediate income and estate tax benefits.

Ultimately, giving to others is a very personal decision. By planning your legacy ahead of time, you may gain greater control of how your assets are passed on to those you love.