The typical retiree has accumulated significant assets. The side effect of this is that this wealth needs to be protected as much as possible. This includes planning to minimize estate and income taxes as well as potential long term care risks. A financial advisor should work with you and coordinate your team’s efforts to grow and protect your hard-earned assets. After all, you did not spend a lifetime accumulating wealth to pass it on to anyone but your family or the causes you care about. Because the landscape is continually changing, your strategy should be an ongoing effort with continual updates and modifications as needed. Your financial advisor should be your partner on this journey. It is our belief that you should strongly consider working with a firm that specializes in retirement and not a jack-of-all trades.

Making the Retirement Transition...

If you are considering retirement, there are some things you should understand as well as a course of action you should consider. Retirement is one of the biggest decisions you will make during your lifetime so it is important to get it right. Take the necessary time and effort to consider all of the options.

FIRST:

Before you retire, you need to objectively make a financial assessment of your situation. Essentially, you should look at yourself from a business standpoint and review your spending patterns, cash flow while working, and tax situation while working. In short, how much do you spend every month?

SECOND: 

Once you understand what you are spending now, you can begin to look at "how will you make your cash flow while retired". This cash flow will come from pension income, social security income, withdrawals from 401k’, IRA’s, or other savings. Keep in mind, you will need to factor in taxes at the applicable rate for a retiree to come up with your spending dollars.

THIRD: 

Once you have a clear understanding of how you will fund your retirement lifestyle, you should review your situation for RISK areas. This includes:

1.	Impact of inflation on my long term cash flow plan?
2.	Are my heirs in danger of losing their inheritance to estate taxes?
3.	What if my spouse or I need to go into a nursing home, how will I pay for this expense?
4.	Are my assets properly protected from a liability standpoint ?
5.	Do I have any children or grandchildren of "special needs" to provide for?

 FOURTH: 

Once you have come this far in your planning, you should now consider how to best position you assets to achieve your goals. The investment decision for your savings should match the goals and objectives of your specific plan. Understanding risk in all of its forms is critical as you decide on positioning the investment of your life savings. Understand the concepts of both market risk as well as the risk of outliving your money.

Retirement Paradigm Shift...

What you need to understand:

Entering retirement, there are a few things you need to keep in the back of your mind. These are critical because the conventional wisdom of what is right, probably no longer apply. After you review this, your specific game plan should make more sense.

Understanding #1: 

Your 401k / IRA balances are not yours. Yes…you read correctly. You have a silent partner who stands to benefit regardless of the plan of action you choose. Who is this fiend? none other than the Federal Government. Uncle Sam let you build up this sizeable nest egg through deferral of pre tax money going into a plan that grew tax deferred. Investment gains and compounding over time have done the rest. Assuming you live 25 years in retirement, the money will continue to grow. The price of this tax-deferred growth is the knowledge that, at some point, Uncle Sam will be getting his pound of flesh in the form of income taxes. With few exceptions, whoever takes the money out will be paying the tax bill. To get a full understanding of this effect, take your total balance and figure the taxes due if you were to take all of the money out immediately. Looking forward you need to understand that a plan will, at best, minimize the damage. In many cases it makes sense to start a withdrawal up front to keep the pile of money from getting too large.

Understanding #2: 

As if the income tax insult is not enough, the same Government stands ready to extract your assets from your future generation in the form of Estate taxes. The best course of planning is to spend all your assets before you check out. In the absence of this is to have your assets positioned to allow you to keep as much for your heirs. In many cases this means giving up some measure of control of assets, or positioning assets to bypass your spouse. If your entire estate is over 1 million dollars, and it is comprised of your house and IRA, Uncle Sam is ready to "double whammy" your heirs with both income and estate taxes.

Understanding #3: 

IRS Qualified money (401k's & IRA's) make horrible estate planning pieces. Stated simply, the tax deferral is wonderful for minimizing income taxes, but lousy for trust funding. Using an IRA to fund a trust gives up all of the wonderful planning opportunities available to your next of kin.

Understanding #4: 

Change is inevitable, especially where money is involved. Knowing this, it is critical that any long-term plan you undertake be flexible and changeable. It is likely that the landscape will change, and hopefully, so will your actions. Keeping this in mind, common sense should be your guide. This means, in the absence of contrary proof, generating liquidity probably makes sense. Again, IRA balances are nice on paper, but useless for gifting, spending, or otherwise disposing of.

Leaving some of your IRA to your kids, and not your spouse, can probably endow them with an income stream that lives as long as they do. The targets to remember are before age 70 ½, and the type of life expectancy calculation you choose.