Retirement - Part 5: Transitioning Into Retirement

When it comes to retiring, some people have been waiting for years and are well prepared for it both financially and emotionally. But, there are many others on the cusp of retirement who are troubled by doubts, questions and uncertainties. That’s where Spectrum Financial Services can help. At the end of the day, the big question is: How can a financial advisor help me adjust and plan for retirement?

Your Financial Professional: An Invaluable Resource

At Spectrum Financial Services, we understand the emotional conflicts, financial concerns, and practical questions that accompany this stage of life. No life transition is simple, and retirement is no exception. That’s why we put together this series of articles —to help you sort through the complexities and to address your concerns. Be sure to check back frequently to learn information that can help guide you down this new lifestyle journey.

Articles in this retirement series include:

  1. Imagining the Possibilities – Examine your personal characteristics
  2. Gathering the Financial Facts – Get a clear picture of your net worth
  3. Life’s Other Realities – Health concerns and family responsibilities
  4. Overcoming Roadblocks – Financial and personal strategies
  5. Transitioning Into Retirement – Steps for a smooth transition
  6. More Help - Valuable resources for prospective retirees

In our previous article, “Overcoming Roadblocks,” we discussed the three most common issues retirees face: the financial challenge, the spousal challenge and the “stuck in a rut” challenge. Now that the countdown to retirement has begun, the next section will help you identify the necessary information and steps you’ll need to take to make the transition into this new life stage a smooth one.

10 STEPS TO TRANSITION INTO RETIREMENT

tran si tion [tran-zish-uhn]: movement, passage or change from one position, state, stage, subject, concept, etc., to another; change

There is no doubt that the segue from working life to retirement life is one of the greatest transitions you’ll have, even if you’ve planned for it. Retirement requires you to make some very delicate decisions; but, it is also a time for new possibilities and exciting opportunities regardless of your age at retirement. There are dedicated professionals at Spectrum Financial Services that are ready to help you every step of the way!

Step 1. Prepare Essential Documents
You’ll want to have the following important documents on file “just in case” you need them. This information addresses your personal wishes and may help family members make decisions on your behalf in the event that you are unable to do so.

Living Will – A living will directs health care providers on how to proceed if you’re unable to make your own medical decisions. This document addresses questions like:

  • Do you want to withhold or withdraw life-prolonging procedures?
  • Would you want to be placed on a respirator if you were terminally ill?
  • Would you want to have a feeding tube inserted if you could no longer swallow?

Remember that even though you may draft a living will, there is no guarantee that your wishes will be carried out. If you feel strongly about this issue, be certain that the person you designate as your health care proxy is aware of the living will, agrees to carry out your wishes, and would be vigilant about making sure doctors and hospitals carry out your directives.

Health care proxy or health care power of attorney – This document authorizes someone you trust to make health care decisions for you if you are incapacitated. The health care proxy or power of attorney is often used in tandem with a living will by the person you entrust as surrogate.

Durable power of attorney – This document authorizes the person that you appoint – your spouse, a child, or other family member of close friend – to act on your behalf in a wide range of financial matters, including paying bills, filing tax forms, buying and selling property and handling investments. A durable power of attorney becomes effective at signing, remains in effect if you become incapacitated, and continues in effect until you die (unless you revoke the authority you’ve granted before you become incapacitated). It goes without saying that you need to name someone you trust completely.

For Safety’s Sake…Just in Case

1. Give your doctors and health care designees copies of your health care directives. Share with your attorney and your designees copies of your durable power of attorney. Make sure that designees and family members know where the originals are.

Carry a card in your wallet that indicates you have a living will and health care proxy. You should include names and phone numbers of the people you’ve designated as decision makers.

Key into your cell phone address book an ICE (In Case of Emergency) phone number. If you can’t give emergency professionals the emergency contact’s name, they will check your cell phone.

Step 2. Sign Up for Medical Insurance

If you’re over the age of 65 or are eligible for Medicare due to disability, you need only to sign up for it and then select a supplement that best suits your needs. If you are not old enough for Medicare, make certain your private medical insurance is in place.

Step 3. Consider Long-Term Care Insurance

Unless you think all of your health care costs will be covered, including assisted living facilities and nursing homes, you may want to consider long-term care insurance to preserve your assets.

Many factors are considered in the price of long-term care coverage: age when you apply; the state of your health; the benefits you want, the length of time the benefits will cover, the waiting period before benefits begin, and whether you want protection for inflation.

Long-term care insurance can be expensive, but the optimum plan may include:

  • alzheimer’s or dementia coverage
  • homemaker or companion services, including shopping and housekeeping provided by a personal care aide
  • home health care covered without having a hospital stay first
  • a short waiting time before benefits are paid out
  • lifetime benefits
  • inflation adjustments on payouts
  • waiver of premium once you begin using the policy
  • coverage for an assisted living facility
  • coverage for adult day care in a center outside the home for part of a day
  • home modifications, such as installing wheelchair ramps

If you already have a long-term care policy and realize it may not be as comprehensive as you’d like, talk with the financial professionals at Spectrum Financial Services. We can assist you in evaluating your current policy and searching for alternatives, if you choose.

Do you still need life insurance?
The decision to maintain a life insurance policy should be based on careful considerations, including if you:

  • have a spouse or dependent child who needs continued support after your death
  • would like to pass on an inheritance to your children or someone not named in your will
  • have a substantial estate and would like to pay the tax burden to preserve it for your beneficiaries

Step 4: Update Your Beneficiary Designations
Review and make changes to beneficiary designations on important documents like your will, IRAs and other accounts. These updates are necessary to reflect name changes, new family members as a result of marriages, etc.

Step 5: Establish a Cash Reserve Fund
It’s always a good idea to have a “rainy day fund” or “emergency fund” set aside for unexpected expenses. You may want to have dividends, interest, a pension or paycheck directly deposited to your money market account or savings account to keep this reserve account funded.

Step 6: Sort, Save and Dump
Now’s the time to get rid of the accumulation of unnecessary paper, blurred photos, newspaper clippings, memorabilia and other items that are taking up valuable space.

The key to organizing paperwork is to prioritize and file important documents where they are easily identifiable and attainable. As you sort, be careful not to toss out papers you might need later. It is recommended that you save the following documents for seven years: tax returns, W-2 forms, receipts for charitable donations, and records of other deductible expenses (even though the standard statute of limitations for audits is three years). If the IRS suspects that you underreported your income by more than 25%, it can audit you up to six years after you file. (If fraud is involved or if you fail to file, there’s no statute of limitations.)

Once you have de-cluttered, make a goal to maintain the organization: Sort incoming mail as you open it, and strip bills of their sales pitches. Remember to shred all confidential paperwork, especially any that could enable someone to steal your identity.

Step 7: Simplify your Financial Record-Keeping
In order to keep tabs on your investments and other financial records, you may want to consider consolidating your accounts. Having them all under one umbrella has many advantages:

  • one monthly statement
  • total accumulations and asset allocation at-a-glance
  • interest, dividends, tax refunds, pension assets and paychecks can automatically be deposited into your consolidated account’s money-market fund
  • set up automatic withdrawals from your retirement accounts or investment portfolio

Once you inform your financial professional of your desire to consolidate accounts, you’ll be asked to sign forms authorizing the transfer of your other accounts. It’s a very simple process, and you’ll probably realize you should have consolidated accounts earlier.

Step 8: Review Your Estate Plan
As retirement draws closer, you should re-consider what you would like to accomplish when you leave money or property to heirs. Some questions to consider:

  • Do you want your estate to provide security for a surviving spouse or partner?
  • Do you intend to leave a legacy to your children, stepchildren, other family members or friends?
  • Do you want to provide money for your grandchildren’s education?
  • Are there reasons to treat heirs equitably, but not necessarily equally?
  • Would you want to leave a portion of your estate to a charity or non-profit organization?
  • In essence, does your present estate plan still reflect your goals?

A good place to start the review of your estate plan is with your will; but, estate plans are more than just wills. You’ll also want to take time to review any trusts, insurance, bank accounts, property, your personal belongings and asset titlements.

Some retirees may find this step difficult, because they view discussing their estate plan as a prelude to death. You may want to think of this step in a different way… Think of putting your estate “in order” as an act of caring for loved ones, so that they aren’t stuck with excessive legal fees, the hunt for documents, or bitterness — either with you or others — in the future.

Have something in your estate plan that is unusual? Then, discuss it with your heirs so that they are not left wondering why you did what you did — especially if you do something that affects their inheritance. Talking about your plans with them is a gift, one that you can only give them while you’re alive.

If you have children, consider adding an “ethical will – or love letter” to your legal will. This meaningful note might try to sum up what you’ve learned in life or share some sort of personal anecdote that helps illustrate a value that you cherish.

Here, for example, is what Arthur Ashe, the tennis great who died in his 40s, wrote to his daughter in his book Days of Grace: “I’m sorry I might not be there for you as you grow up, but when you feel sick at heart and weary of life, or when you stumble and fall and don’t know if you can get up again, think of me. I’ll be watching and smiling and cheering you on.”

Step 9: Rehearse Retirement – Be a “Retiree in Training”
Before setting up a plan for retirement, you may want to “try out” or “practice” a few things to determine if the ideas are feasible for this new stage of life. Among the ways to test, rehearse, or be a “retiree-in-training” without actually moving into the stage:

  • Take longer vacations, filling your days with golf, travel or any leisure activities that you’re hoping to engage in extensively during this next stage.
  • Check out various volunteer opportunities you think you might be interested in.
  • Spend more time with friends and family than you have in the past.
  • For a 3-month time period, try to live off the budget you set for yourself for the next stage of life.
  • Begin a “fantasy vacation” file. Clip articles and collect friends’ suggestions for destinations or experiences you think you might like.
  • Start an exercise program.
  • Check out the availability of grants or fellowships from not-for-profit organizations that would allow you to do volunteer work in another part of the country or world for three to six months.
  • Get serious about pursuing a special interest that you’ve always had, such as learning to play the guitar or becoming a master baker.
  • Take courses toward the degree or certification program that you’re interested in.
  • Speak to people in organizations or businesses that you might be interested in working for one day on a full-time, part-time, or temporary basis, to see if they would consider the arrangement.

Step 10: Envision Your Time and Develop an Action Plan
Thinking about how you’d like to spend your time in retirement can be a fun and rewarding experience. Take out a blank calendar page and fill in the types of activities you’d like to partake in. You may want to consider the following types of activities:

  • Leisure/relaxation
  • Exercise/physical activity
  • Social activities, including time with friends, seeing movies, etc.
  • Work and volunteer activities

What would your perfect month look like? While schedules usually don’t always work out exactly like we plan, writing activities down on paper helps us envision a lifestyle we’d like to achieve.

Now it’s time to develop a written action plan to help you transition from one stage of life to another. Having the plan on paper, where you can post it and view it every day, makes it more real, and it holds you accountable because others can check on your progress.

We advise that your action plan have five components:

  1. Your retirement goals
  2. Specific steps needed to accomplish your goal
  3. Deadlines
  4. Follow-up needed and when
  5. Comments

How Spectrum Financial Services Can Help Along the Journey
We have given you a lot of information to process, but you don’t have to work through the transition on your own! Let the professionals at Spectrum Financial Services assist you along the way. We can help you:

  1. Consolidate your financial information and help you organize it.
  2. Set up an investment plan that seeks to provide you with the income you need to accomplish your goals and maintain the lifestyle you desire.
  3. Guide you on how much money you can withdraw from your investment portfolio.
  4. Make sure the beneficiary designations on all your accounts are up-to-date.
  5. Track your stock options and restricted stocks
  6. Help reinvest income that isn’t needed now.
  7. Work with your estate attorney and accountant to make certain everything in your investment portfolio is accounted for and titled correctly in your updated/revised estate plan.
  8. Meet with you regularly to review the asset allocation and the investments in your portfolio to take advantage of economic trends and realign your investments to meet any changing needs and goals.

RETIREMENT…TO BE CONTINUED

 

Be sure to return to the Spectrum Financial Services website www.sfsplanners.com to read the final article in this series, “More Help - Valuable Resources For Prospective Retirees.”

If you want to get started right away with your retirement discussion, you may contact the investment professionals at Spectrum Financial Services by calling 515.255.3306,

e-mailing us: info@sfsplanners.com, or visiting our website at www.sfsplanners.com.

Securities and advisory services offered through VSR Financial Services, Inc., a registered investment adviser and member FINRA/SIPC. Spectrum Financial Services is independent of VSR Financial Services, Inc.

Advisory services offered through Legacy Financial Group, LLC d/b/a Spectrum Advisory Services, a Registered Investment Adviser. Securities offered through Broker Dealer Financial Services Corp. Member FINRA &  SIPC. Broker Dealer Financial Services Corp., Legacy Financial Group, LLC, and Spectrum Financial Services are not affiliated companies.

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