Retirement Planning

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As retirement age children are typically present when we counsel their parents, we often ask the children how they plan to avoid the "crisis planning" their parents are currently going through. We find that the children are equally shocked and unaware that their retirement insurance plan of Medicare and supplements will not address long term care needs. We then ask if they are aware of the 5 phases and goals of retirement planning and inform them that minimizing income taxes and achieving high rates of return on their retirement investments are only two of the 5 phases and goals. The 5 phases follow:

Unfortunately, the vast majority of retirement age children are unaware of the crucial phases and goals of retirement planning.

Retirement has changed radically over the past several decades in America. Years ago, you expected to work most of your life for a single, large employer and you then would count on a pension in addition to your social security. Today, in all likelihood, you will be living in retirement on money you saved through IRA's, 401(k)'s, and investments.

All federal employees, 80% of state and municipal employees - but only 20% of private-sector employees - are enrolled in pension plans.

PHASE 1: ACCUMULATION

This period lasts your entire working career and includes choices of employers who contribute to your retirement savings, may have a pension plan and your ability to contribute the maximum allowed throughout your work career. As an example, $100,000.00 in savings invested at 5% compounded annually will grow to $168,000.00 in 10 years and will double in 15 years.

PHASE 2: PRE-RETIREMENT

This phase begins when you reach 50 years of age or are 15 years away from retiring, whichever happens first. Although you may not wish to do so, this is the stage to begin thinking of end of life provisions and estate planning.

PHASE 3: EARLY RETIREMENT

This phase lasts from the day you retire until you are 70 years old. A key detail in this phase is to make your family aware of your financial plan, living choices and long term healthcare wishes in a calm, supportive way. To be conservative, you should project your needs to age 100 and consider the growth of your savings, inflation, taxes and living expenses and most importantly, healthcare costs and how to manage them until then; and how to use the MRD (minimum required distribution) of your tax deferred accounts - IRA's, 401(k)'s, etc. which require withdrawals at 70½.

PHASE 4: MID-RETIREMENT

This phase begins at age 75 and lasts as long as you are able bodied and high functioning. Despite your good health, you must advise your family how you wish your healthcare to be rendered should your condition decline significantly. Conversely, the loss of certain mental abilities is a natural consequence of the aging process and by our nature, we resist letting go of our autonomy and control. This is usually characterized by denial and refusing to consider/discuss the impacts of these age consequences. This is where the elder care attorney's asset protection planning actually plays out to your benefit. Remember that there is a 5-year penalty of ineligibility on transfers to qualify for long term care benefits. Don't wait for the crisis and then lament "I could have/should have planned but I didn't". Time is of the essence to do so by age 70.

PHASE 5: LATE RETIREMENT

This phase begins when your health has declined and there is little likelihood of it being fully restored. It is common that one of the spouses will become the primary caretaker for the other. In this stage, it is critical that elder care and the asset preservation planning, hopefully begun during the earlier phases, will produce fruitful benefits to avoid impoverishment of the healthy spouse due to the healthcare needs/costs of the infirmed spouse.

For a free initial consultation regarding Retirement Planning, call us at 973-887-4254 or click here to contact us online.