Retirement Planning

Questions to Ask Your Financial Advisor About Retirement (2022 Update)

As you near retirement, it’s important to talk to your financial advisor about retirement. After all, you need to know that they can competently guide you on your retirement goals, build a plan that lets you maintain your preferred lifestyle, and help your money last as long as possible.

This begins with having a conversation around your unique situation, and it pays off to ask your advisor some questions that help put everything in context. Here is a high-level list of questions to ask your financial advisor about retirement:

  • Tell me about what you do to help people with retirement planning.
  • How long have you worked as a retirement financial advisor?
  • Why do you do what you do, and what are you most passionate about in this field?
  • When do you think that I can retire, and what are my options?
  • Do I have enough money to retire?
  • What should my retirement goals be?
  • What do you think of my current financial plan for retirement?
  • How much can I spend in retirement? Will I be able to keep up my lifestyle?
  • How will I fund my lifestyle once I have retired?
  • What will taxes be like for me in retirement?
  • How long will my money last before I run out of income?
  • What can you do to help me be ready for major financial risks in retirement?
  • I have a pension. What could happen if something happened to my old employer or if my pension benefits were cut?
  • When should I take Social Security benefits?
  • What should I know and do about Medicare and health coverage in general?
  • What can healthcare cost me throughout my retirement years?
  • What do you do to help my retirement plan keep up with inflation?
  • What can happen if I retire in a recession or market crash? How do we plan for that?
  • What are some other ‘bad situations’ to keep in mind, and how can you help you plan for those scenarios?
  • Say I choose to delay retirement or keep working. What are the advantages and disadvantages of doing that?
  • What can we do to ensure that my spouse or I have sufficient financial resources in place should one of us pass away?
  • How much could long-term care cost us in retirement? How likely are we to need some sort of long-term care support?
  • What sort of life changes have you seen other people experience in retirement?
  • What do you think of my estate plan?
  • What else can I do to prepare for retirement?

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Capital Preservation and Why It Matters

capital-preservation

You may have heard of capital preservation strategies at some point or another when planning for retirement. But what is capital preservation exactly? What could it mean for your overall financial plan?  

Here’s a quick look at what capital preservation involves – and why it becomes more important as people move into retirement and beyond.

What Is Capital Preservation?

In a nutshell, capital preservation is a kind of financial strategy that aims to minimize the risk of loss in your investments. It emphasizes the protection of your money, or “principal protection,” as it’s known in more formal terms.  

A well-known rule of thumb in finance is how there is an inverse relationship between risk and reward – or how much risk you take on in order for your money to have more growth potential.

Since capital preservation is focused on protecting your money, this brings up certain questions. By adopting a capital preservation strategy, does this mean that your portfolio won’t grow any more over time?

Thankfully, the answer to that is no. That said, the rate of growth will vary depending on what makes sense for your risk tolerance, personal situation, and timeline until retirement.

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Business Succession Planning: Most Small Business Owners Don’t Have a Plan for Retirement

business-succession-planning-transition-small-business

Any small business owner can tell you about how much they have given to building their companies. But what about business succession planning, when it comes to making their exit on the backend?

Whenever, and however, they decide to step away, are these entrepreneurs as ready as they could be to enjoy the hard-earned fruits of their life’s work? A survey by Wilmington Trust offers some answers.

It’s no exaggeration to say that small businesses play a big role in America. Both Project Equity, a non-profit group focused on economic security, and the U.S. Census Bureau estimate that there are approximately 2.34 million small businesses in the U.S. These companies employ about 25 million people and, pre-pandemic, generated roughly $5 billion annually in aggregate revenue.

Yet while small business owners are actively involved with their enterprises, a study by Wilmington Trust found that many of them don’t have transition plans. What’s more, a large percentage of these entrepreneurs haven’t even thought of any business succession planning.

According to Ernst & Young’s Family Business Center of Excellence, the average age at which small business owners start transitioning from their businesses is 62.

For a lot of entrepreneurs, succession planning will likely cover some sort of transition to retirement. Or it might be a lifestyle in which they remain plugged into their communities, but they might not be as active in their companies as they were in earlier years.

However, in the study, nearly 60% of small business owners didn’t have a formal business succession plan of any kind currently in place. Moreover, 11% of this group hadn’t even thought about having a transition plan at all.

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What Are Major Sources of Retirement Income for Americans?

What will be your major retirement income sources? What income streams will you count on to keep up your ideal lifestyle in your ‘non-working’ years? Do you plan to be financially independent, or will you have to depend on your children or other loved ones for support?

These are important questions as you move closer to retirement. Once you step back from a full-time career, your current income from work earnings, entrepreneurship, or other sources will probably change.

The focal point then turns to your lifestyle in retirement and what sources of income you will use to maintain it. Nor is this just a personal question. Rather, it’s a major concern for millions of retirees affecting their financial future.

One survey that can help with these questions is from the Transamerica Center for Retirement Studies. Each year, this survey captures findings from thousands of retirees, workers, and even employers, including on what they are using for major retirement income sources (or what they expect those sources to be).

The Transamerica study is considered to be one of the most accurate samples of the U.S. retirement landscape as a whole. Its numbers are typical of the ‘average’ retiree in America.

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How Retirement Differs for Different Generations

Every generation faces different obstacles for retirement. But if you were to tune into any financial talk show today, you might hear the host say that retirement isn’t even close to how it was for your parents and grandparents. Why?

Nowadays, people have a variety of issues that are different in scope or that weren’t even around for prior generations. Never-before-seen economic conditions (such as those tied to the COVID-19 pandemic), lengthened lifespans, and evolving financial risks are all contributors to this.

What’s more, the definition of retirement has changed. Nowadays, retirees are taking their golden years by the horns. They are enjoying full lives of second career acts, budding entrepreneurship, volunteerism, and pursuit of lifestyles that might have not been possible for their parents or grandparents.

Here’s a look at why retirement is different for people today than it was in the past — and how you personally can be ready for the changes.

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How Deferred Retirement Option Plans (DROPs) Work

Are you a public employee and close to retirement age? If you prefer to not ‘separate from service’ quite yet, opting for a DROP retirement program can be worthwhile.

Depending on your employer, DROP is short for “deferred retirement option program” or “deferred retirement option plan.” DROP plans first came about in the 1980s for public-sector employees. Currently, members of law enforcement, firefighters, educators, and other civil employees often have this sort of program as an option for delayed retirement.

You have probably heard of some of the many states that offer a DROP program, including Florida, Ohio, Texas, and California. Of course, state governments aren’t the only ones with DROP programs. Municipal governments also offer DROP retirement options to their employees.

DROP benefits can be a great boon to employees who would otherwise prefer to keep working and not quite settle into retirement. If you do have this option as part of your retirement benefits, it’s a good idea to look more into it and see if it might make sense for your working goals.

Are you unsure about whether your retirement system has a DROP option? You can check with your HR department for more information.

All of that said, here is a quick rundown of what deferred retirement option plans involve and what sort of benefits you might obtain from it as a long-term civil employee.

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Retirement Income Planning Strategies – A Quick Guide

Early on, your retirement planning was probably focused on accumulating savings and growing your money. You aimed to invest and to enjoy solid returns for your money, perhaps with an advisor’s help.

However, things change as we get closer to retirement. Now, it’s more important to protect the money you have put away over the years. And once you retire, you will use this nest egg to replace the income stream you received during your career. Whether it was from a job, entrepreneurship, or other programs, that income source will change in some way.

A well-thought-out retirement income planning strategy can make a difference in helping you enjoy a comfortable lifestyle. This quick and in-depth guide will lay the groundwork for helping you create an effective income plan.

Keep these retirement income planning tips in mind as you start planning for how you will have financial security for many years ahead. Here are a few things to know and do in order to increase your chances of a secure, fulfilling retirement.

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The Cost of Waiting to Save for Retirement

The Cost of Waiting to Save for Retirement

When you are in the later stages of your career, retirement might be the furthest thing on your mind. It’s no wonder, as many other financial priorities are likely competing for your time and attention.

At this point, many people are thinking about how they will help their kids pay for college. For others, it’s about assisting their aging parents with costly health expenses. Or perhaps paying off debt is top of mind.

But retirement can creep up quickly. For some folks, it can be sooner than they think, whether via a forced early retirement or a layoff that makes it hard to find another job. Read More

Understanding Taxes in Retirement

Understanding Taxes in Retirement

If you live in the United States, then you know first-hand about taxes that we have to pay. In retirement, those taxes can add up.

Sales tax, income tax, estate tax, and gift tax are just some of the ways that Uncle Sam collects from taxpayers in order to meet his financial obligations.

The subject of taxes is always a hotbutton issue in presidential elections as it is in state elections. With talk of possible tax hikes at present, many people who are retired and nearing retirement are wondering about how they can watch their tax bills.

Fortunately, there are a number of things that you can do to help alleviate, and maybe reduce, the taxes that you owe every year when you file your return.

Here’s a quick, high-level look at the different taxes in retirement that you might face – and what you might want to talk to your financial professional about planning for taxes-wise. Read More

Next Steps to Consider

  • Start a Conversation About Your Retirement What-Ifs

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    Start a Conversation About Your Retirement What-Ifs

    Already working with someone or thinking about getting help? Ask us about what is on your mind. Learn More

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