A Holistic Approach to Your Financial Future
Importance of having a plan: We all plan to retire one day and, unfortunately, we will also need an estate plan at some point. A well-crafted estate plan will help you to ensure your assets are distributed according to your wishes, tax efficiently and avoiding probate as much as possible for a quicker and more efficient transfer of wealth. A well thought out Retirement Income Plan will help you to have strategies in place for a more independent and efficient retirement.
Retirement Income Planning vs. Retirement Planning: While retirement planning focuses on accumulating assets for retirement including saving, investing and asset allocation; Retirement Income Planning add to that focus and incorporates much more. Retirement Income Planning involves the accumulation of assets along with strategies for distributions in retirement that are tax efficient and can adjust based on a variety of factors. Factors such as market conditions, inflation, interest rates, longevity, tax rates as well as changes to your health over time. Building multiple options for accessing income and have contingences in place can offer a higher feeling of independence. Retirement income planning considers Social Security, Medicare and possibly Medicaid as well as Pensions and the risk of long-term care expenses and how they can affect your lifestyle and security during your later years. In addition, a retirement income plan will take into account current spending and project out future spending goals in retirement. As you can see, retirement income planning is much more comprehensive than a simple accumulation plan.
The Team Approach: While Estate Planning and Retirement Income Planning are separate; they are very much intertwined. In fact, we should include Tax Planning here as well. I find it best to build an estate plan with a team of professionals. You want to work with a qualified estate attorney and confer with your CPA or tax professional while you are working with a qualified financial advisor. Each member of this team has their own area of specialty; although there are some overlaps.
Estate Attorney:
Assess your situation, learn your wishes and build a strategy for your estate plan.
Draft appropriate legal documents that may include wills, trusts, powers of attorney, and healthcare proxies.
Work through ways the estate plan can minimize taxes and avoid probate.
Tax Professional:
Understand current tax law and the tax implications that may arise from estate transfers, inheritance, and gifts.
Help to give context and offer ideas that can minimize estate taxes.
Financial Advisor:
Assess your financial situation, understand your current cash flow and your goals.
Identify risks that may disrupt your ability to reach your goals and educate you in this area.
These risk include: Longevity risk, Inflation protection, Tax risk, Healthcare risk, Sequence of returns risk, among others.
Asset Management and investment strategies to help you build wealth for retirement.
Build a plan for retirement income strategies, contingences and emergency funds that are in line with your goals.
Review beneficiaries so that they are align with your estate plan.
Build strategies to help avoid risks listed above, recapture wasted dollars, minimize taxes today and at death.
Look at how different Scenarios may work out: It is so important to understand how different retirement income strategies can impact estate plans. Without getting into too much detail, current tax law dictates how your heirs will be taxed on different types of inherited assets. For example, if you leave a traditional IRA to your adult child who is not disabled, they may need withdrawal all of the funds over the first 10 years after your death. This will count as income, on top of their income. This could put them in a high tax bracket. Other types of accounts may pass tax free or at least get a stepped-up cost basis at your death. Your financial advisor should be discussing these types of topics with you.
In summary: I always say, ‘we all have a job for a reason.’ Your Attorney’s knowledge set is very different than your Financial Advisor’s or your CPA’s. Having us all work together on your behalf can lead to better outcomes for both retirement and estate distribution.
Next Steps: If you have estate documents, go find them and read them to see if they still make sense to you. Even if they make sense to you, reach out to your attorney for a review. Pull in your tax professional and your financial advisor as your team. Have them each listen to you share your goals, your concerns and your expectations of them. If you do not have a team already formed, the time to build one is now. Be sure to find professionals who are licensed in your state and have experience in these areas. Make sure your attorney is an estate attorney and I would also recommend your financial advisor carries the RICP designation. This designation means your financial advisor has additional education and training in Retirement Income planning.
At Empowered Financial Strategies, we serve Executive Women, Successful Pre-retirees looking to build a retirement income and estate plan as well as Pre-retirees with adult children with a disability or special needs. Our team specializes in these areas. We have referrals for tax professionals and attorneys who are also experienced in these fields. We spend the time to get to know you and your family. We lead with education with the goal to help you craft your ideal retirement.
Have more questions, feel free to reach out to Info@Empowered-fs.com. We are happy to answer questions or point you in the right direction.
At EFS, we understand the importance of a good foundation of financial knowledge. We offer educational workshops in areas of insurance and investing with this end in mind. If you have a group or association and would like us to speak, please reach out to us at Contact (empowered-fs.com)
About the author:
Carolyn Humphrey is a Financial Advisor, with licenses in areas of Life, disability, health and Long-Term Care Insurances as well as a number of Finra licenses allowing her to work in various areas of Wealth Management. She has earned the RICP®, (Retirement Income Certified Professional), from the American College. This designation helps Financial Advisors learn about how to guard against the 18 risks that clients face in retirement. She has also earned the WMPC®, (Wealth Management Certified Professional), which is designed to help Financial Advisors build efficient portfolios for goals-based investing. Carolyn has also earned the CLF®, Certified Leadership Fellow, which has helped her in various leadership positions such as being a national trainer as well as a manager of a team of advisors. She has been married and caring for rescue pups since the early 1990’s and has been an avid Buffalo Bills fan forever. Go Bills!
The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security or insurance product. Empowered Financial Strategies does not offer Tax or Legal Advice. Registered representative of, and securities and investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member FINRA/SIPC, 600 Dresher Road, Horsham, PA 19044. 800-873-7637, www.htk.com. HTK is a wholly-owned subsidiary of The Penn Mutual Life Insurance Company. Empowered Financial Strategies is unaffiliated with HTK. HTK does not offer tax or legal advice. Always consult a qualified adviser regarding your individual circumstances. 7164194RG_Oct26