Month: September 2018

After you retire, you need to make some major changes to your life, apart from the obvious ones. After you stop working for good, you’re likely to find yourself with new pastimes, new spending habits, new routines and perhaps even a new home. As a result, you need to remember that your insurance coverage is probably becoming less and less adequate, so you may need to update or change your insurance policies in order to reflect your new retired life.

Financial planner Benjamin Sullivan recommends that seniors shouldn’t rush to cancel their insurance, but should have a serious think about their future and insurability. He explains:

“There isn’t a one-size-fits-all answer. The standard wisdom might be the exact opposite of what’s best for the specific individual.”

There are lots of ways your insurance policies could change after you retire, but here are some very important ones to think about!

Medical insurance

As retirees age, it’s obvious that they need some decent medical insurance. Older people tend to require more medical treatments and drugs, meaning that their medical bills will soon pile up if they don’t have a good health insurance plan in place. Also, according to the ACA, basically every US citizen must have health insurance or face potentially devastating fines.

Luckily, most senior citizens who are 65 or older are eligible for Medicare coverage, while those who are still employed may have similar benefits through their employer’s employee health plan. Although it’s good that Medicare exists, it can be better to stick with your private health insurance plan, so be sure to bear this in mind and draw some comparisons.

If you don’t want to apply for Medicare when you reach 65 because you have a private policy in place, be sure to inform the authorities that you will be waiving your right to Medicare. If you forget, you could face a fine for “late enrollment” despite not having plans to enroll in it at all!

Renters or homeowners insurance

Renters or homeowners insurance protects your possessions within your home and also gives you liability coverage too. If you’ve bought some new items in your retirement, such as expensive jewelry, it may be worth taking another look at your renters or homeowners insurance.

Auto insurance

As you get older, you may find that your auto insurance premiums rise due to things such as eyesight problems or hearing problems. If this is the case, it may be wise to worth with an insurance broker who can get you a competitive deal for your age.

Need help with new insurance policies after retiring? Get in touch with our team today!

Although retirement advice normally centers around doing some new hobbies or going on a dream vacation, attorney Natalie Choate thinks that new retirees should slow down and get the boring stuff out of the way first. She states:

“Take a minute or a rainy weekend and do something boring. Find and organize all your retirement plan records. You can save yourself and your heirs a lot of trouble (and money) just by doing some paperwork.”

Although it’s not the romantic version of retirement, she certainly has a valid point. These days, people are more responsible for their own retirement funds, what with 401(k)s and IRAs which need to be carefully managed in order to extract their full value. This shift toward non-private pensions means that retirees need to be more financially savvy when it comes to their retirement fund.

Investments and stocks

If you’re looking for a decent retirement nest egg, it’s important to make some smart investments. A smart investment strategy, particularly one which operates via automated withdrawals to tax-deferred retirement accounts (like your 401k) can help you to easily build up funds in a low-risk and low-tax manner. Although the stock market is inherently volatile and there are fears of another 2008-esque crash, the stock market’s current state means that many stocks are “on sale” and are thus more affordable for people looking to secure their future retirement finances, regardless of their age.

Of course, you should always be wary of the stock market if you’re nearing retirement, as a steep market pullback could obliterate your savings if you are drawing down your portfolio. This risk could be mitigated by using cash, but experts recommend taking a middle-ground approach at the moment due to unimpressive cash yields. Robert Westley, VP and Wealth Advisor, explains:

“During bull markets, like the one we have been experiencing, clients often forget the importance of holding fixed income in their portfolios. Investors should utilize prudent asset location planning when determining where to hold their target equity and fixed income exposure”.

He goes on to explain that asset location planning requires considering the different tax characteristics of asset classes and their accounts/vehicles where they are held. Doing this helps you to gain an improved after-tax return rate, which is ideal when trying to save up as much as possible.

Social security

Despite changing measures and tax reform, retirees’ dependence on social security remains high. Luckily, favorable taxation policies and inflation protections are helping to keep social security a strong cash flow source for retirees, guaranteeing them payouts until the day they die.

Furthermore, regulations on mixing social security with regular retirement accounts and savings have been relaxed in recent years, allowing you to still receive social security money from the government while harnessing your own financial power and retirement savings.

Taxes

Ed Slott, a CPA from New York, states: “Taxes are the single biggest factor in how much you can spend in retirement.” As tax reforms have begun pressuring states to tax their citizens more than ever before, retirement income becomes a big issue for those who no longer have the capacity to work. State and local tax (SALT) deductions are still capped at $10,000 per year in some states, which may make them attractive states for people to retire to if they want to minimize their tax liability and financial burden in their older age. Slott explains the complications of the current tax system for retirees:

“The IRS recently explained that conversions from 2017 can be reversed, completely or partially, until this Oct. 15. From now on, this type of recharacterization won’t be allowed.”

This means that your IRA conversions should ideally be processed late in the year, as then they will be able to grab a lower tax rate. New tax laws also mean that federal estate tax exemptions have been increased to roughly $11 million, leaving many retirees with less to worry about when it comes to planning their estates for their loved ones.

Planning for your retirement is inevitably a complicated and multifaceted process, requiring financial knowledge in multiple areas. If you’re looking for help with planning your retirement effectively, contact us today for bespoke advice.