4 Tips for Planning for Your Post-Retirement Future
With age, the focus often turns from planning for the purchase of a bigger home to planning to have enough income to live well after retirement. Many factors contribute to this calculation, but following are four common considerations:
Do I need an income portfolio?
Spending down the money you’ve saved and planned for over your working life is a concept that makes many of us uncomfortable. It may mean going below whatever benchmark figure we struggled to achieve. It takes a mental leap to realize that what you really saved for is spending down. The primary consideration isn’t whether you need an income portfolio, but rather is whether you have a tax-efficient, diversified income fund that will give you the income you need to maintain the lifestyle you want to have.
Should I invest in stocks or bonds?
Because your ultimate goal is having the income you need on an annual basis, the answer is that you need a mix so that you can maximize the inflation-adjusted after-tax return on your investments. As has been obvious recently, the stock market can be erratic. High-quality bond rates stay stable even when stocks fall. That’s why financial advisers recommend having both in your portfolio. The percentage of each fluctuates with factors, such as age and risk tolerance.
Is it a smart idea to have a mortgage?
Maybe. It depends on your goals. But here’s something to consider: will you make more by paying down your mortgage and investing that money than you will by paying a mortgage? The calculation to consider is whether your mortgage rate is higher or lower than the value of the tax deduction for your mortgage.
Should I buy long-term care insurance?
This can be a tricky question, in part because the thought of not having a plan in place feels so unsettling. But here are some facts to think about: Most women who need long-term care need it for about 2.5 years; men need it for about 1.5 years — which means you will need at least $300,000 (in today’s dollars) to fund this expense.
High-net worth individuals can plan to self-fund; those with few assets will have to rely on Medicaid and other government programs. People in the middle can choose to use assets like the sale of their homes to fund their care, or they can purchase a long-term care or hybrid life/long-term care product — each of which offers advantages and disadvantages.
Any money you spend on long-term care will decrease the amount you can leave to your heirs.
These are but a few of the questions that need to be answered as you plan for your financial future. Many factors affect the answers that are right for you as you plan for a comfortable, stress-free retirement, but having a plan that addresses these four issues is a good start. For other considerations and guidance, contact us today.