By Adam K. Wright, CFA®, CFP®
When you’re within five to ten years of retirement, it’s quite common (and smart) to focus on your savings and investments. We all want to make sure our retirement savings lasts so we can have a comfortable future without worrying about running out of money. Yet that isn’t the only piece of the retirement puzzle you need to prepare for. Estate planning is an often overlooked but equally important aspect of your retirement plan.
Estate planning involves considering what will happen to your assets and personal possessions when you pass away. It also includes taking steps so that your financial and healthcare desires are followed if you are incapacitated and can’t make those types of decisions on your own. At Wright Associates, we understand the importance of thinking through key estate and legacy decisions. Here are four key points to keep you focused on what’s important when planning for your retirement.
All Retirements End—But When?
Retirement is often seen as a time of relaxation and enjoyment, but it’s also important to remember that all retirements come to an end. While it may be difficult to think about, it is crucial to plan for the end of your retirement so your wishes are respected after you are gone. When it comes to the end of your retirement, estimating longevity is necessary. Remember, though, these are just estimates to help frame retirement planning. Other than using statistics from the American Academy of Actuaries, you can ask yourself some personal questions too. Do you have any illnesses or difficulties that might cause you to have a shorter life span? Are there any family medical issues that might affect you?
Wondering how we plan for how long retirements last? Check out this handy tool from the Society of Actuaries, the Longevity Illustrator.
Importantly, spouses have different life expectancies. If you think you might survive your spouse by many years (or vice versa!), you need to properly plan for that contingency. Are all your accounts structured the way they should be? Will the survivor have any trouble accessing the money? Are all beneficiary designations properly considered? Unfortunately, too many people put off paperwork or don’t get around to properly titling property, leaving a surviving spouse in tenuous situations at their passing. Addressing beneficiary designations and titling of accounts is an important part of our financial planning process. We help clients review beneficiary designations on an ongoing basis.
You Will Likely Leave Something Behind
Another important consideration is that you will likely leave something behind. Whether it be a substantial amount of money, personal belongings, or a cherished family home, most retirees have something of value to pass on to their loved ones. Who would you like these assets to go to, and how much would you like for them to receive?
Every person will have different answers to that question, but it’s a question that needs to be addressed and planned for. It’s wise to spend time considering who could receive certain gifts, so you can plan for your wishes to be met and support the people and organizations you care about.
There are different ways assets can and will be passed on. At your passing, your investments and assets may pass on by the laws of intestate, by Will, or by operation of the law. In order to make sure your end-of-retirement wishes are fulfilled, consider who you want to get what, and label accounts accordingly. Clients with well-formed estate and legacy plans will have a will (and/or trust) and correctly assigned beneficiaries on retirement accounts. It’s best to consult with an estate attorney to help you draft the correct documents.
Your Retirement Plan Includes a Legacy Plan
On a related note, families who have accumulated substantial sums of money won’t just leave some money behind; they could leave enough to build a legacy. If that describes you, consider how you’d like your money to benefit others over the long term, well after you’ve passed away. What people, causes, or organizations would you like to support?
It’s also key to develop this type of plan well in advance. It is far too common for retirees to leave this aspect of planning to the last moment, or for their estates to become a mess as a result of poor planning. That can result in your money not being directed where you want it to go, as well as placing unnecessary stress on your family.
Start by getting your balance sheet in order, formulating critical legal documents, and engaging in a conversation with your heirs or beneficiaries about your wishes. While not an exhaustive list, these steps help create your legacy plan.
The Earlier You Start the Conversation, the Better
The earlier you start the conversation about your legacy and estate plan, the better. Whether you are a few years away from retirement, or you’re well into it, it’s never too late to start thinking about what you want to leave behind. Starting the conversation early helps get everyone on the same page and structure your estate in a way that meets your needs and the needs of your loved ones. Once in place, review your estate plan once every few years. Circumstances change, sometimes by a lot, so an important part of retirement planning is keeping your legacy wishes up to date!
This might involve working with an attorney to put the right legal structures in place, align your accounts to your legal documents, and review your beneficiary designations. Whatever steps you take, the most important is to simply take action and start the conversation. This is especially true if you have substantial assets and a legacy plan that will take time to put into action.
Plan Now, Not Later
Don’t let the end be an afterthought in your retirement plan. Take control of your legacy today. If you’d like to learn more about how we can help you plan for the future with the end in mind, reach out today. You can schedule a complimentary phone call to get started and learn more about our services.
About Adam
Adam Wright is a CERTIFIED FINANCIAL PLANNER™ professional at Wright Associates, helping clients plan and prepare their investments to retire on their terms. If you’re serious about planning for your retirement and investing for your future, his annual process will help you make the right money choices today. Therefore, Adam and his team will proactively manage your accounts while communicating the progress of your financial plans. He believes the retirement advice you receive should be intentional and actionable.
Adam has a Bachelor of Science in Supply Chain and Information Systems from The Pennsylvania State University and a Master of Business Administration from University of Pittsburgh, Katz Graduate School of Business. He lives in Upper St. Clair with his wife and two children. When he’s not working, Adam enjoys the outdoors (fly fishing), reading, and taking long runs while listening to a favorite podcast. He’s also currently encouraging himself to take up golf. To learn more about Adam, connect with him on LinkedIn.
