You worked hard for decades, earning an income and stashing away a portion for retirement. After thorough deliberation with your financial advisor, you decide that you can finally retire!
Many believe their financial advisor’s primary purpose exists while they accumulate money for retirement. Since financial advisors act as a coach through the ups and downs of the market, it is certainly important to have a trusted advisor while you accumulate money for retirement! However, due to the added complexities that retirement brings, retirement could be the most important time for financial advice, especially considering income and expense planning, long-term care planning, and legacy planning.
During our working years, income and expenses are generally predictable. We usually know what our paycheck is each period, and our expenses are generally similar from month to month. Conversely, income and expense planning is often more complex during retirement. Retirement income can be generated from a variety of sources, including part-time jobs, social security, annuities, and interest/dividends from investments. Furthermore, income from some of the aforementioned categories can vary from year to year depending on personal circumstances and market conditions. Although many expenses are still predictable during retirement, some are not. One year, you might have grandiose plans for a trip to Europe, while another year brings a medical complication that requires an expensive surgery to remedy. Given the additional nuances, having a trusted advisor during retirement is extremely important because they can help you pull income from the most efficient sources and manage the cost of your dream retirement.
During retirement, the risk of long-term care increases in prominence. Long-term care occurs when one has a cognitive impairment or if he/she could not perform at least two “Activities of Daily Living.” The Activities of Daily Living (ADLs) are bathing, dressing, toileting, transferring, continence, and feeding. SingleCare estimates that 70% of retirees will face a situation where long-term care will be needed. Depending on the level of service needed and where you live, long-term care costs could be well over $10,000 per month. Sometimes, a long-term care event could last for years. Obviously, facing a long-term care event could be devasting to your financial situation. There are many ways to prepare for these long-term care events. During retirement, it is important to speak with your financial advisor to ensure that your financial picture will be secure if you or a loved one needed long-term care.
Retirement is often called the “Distribution Phase” of an individual’s financial life cycle. Not only does the distribution include living off your accumulated assets, but it also involves leaving behind a legacy. Leaving this legacy could involve lifetime gifts, such as gifts to individuals or charity. Leaving a legacy typically also involves managing one’s estate. Sadly, the event of your death often is the biggest tax bill that your assets will ever face. Income Taxes, Inheritance Taxes, and Estate/Gift Taxes present many pitfalls. It is crucial to navigate this tax minefield with a carefully crafted legacy strategy to minimize damage from avoidable taxes. When considering how to leave a legacy (during life and death) speaking with a trusted advisor is extremely important.
Whether you are mapping cashflow, planning for long-term care, or preparing to leave a lasting legacy, retirement is prime time for financial advice. At Ambassador Advisors, we look forward to helping you through this next phase of life.
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