-
-
-
-
-
-
-
-
-
-
 >Retirement Plan Checklist
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
|
Your Retirement Checklist
Key Points
What does an artist and someone planning for his or her later
years have in common? Each visualizes their final objective, but
the process is fluid. Although your situation is unique, there are
basic elements you can use to sketch an effective retirement
plan.
Pointers for the Accumulation Phase
An important action you can take is to determine your retirement
needs. This task involves identifying your potential retirement
expenses, as well as estimating the amount you might receive from
each potential source of retirement income (Social Security,
pensions, personal investments, and employment earnings).
Doing this calculation will give you an idea of how much you may
need to finance a comfortable retirement. Don't be surprised if the
numbers add up to be a large sum -- after all, this money may need
to support you for 20 or 30 years. Fortunately, there are ways to
leverage your dollars.
Starting early and contributing as much as possible to
employer-sponsored retirement plans and IRAs may help you to
potentially accumulate more money. Why? Because investing in these
tax-advantaged accounts means your money will work harder for you.
The longer the money sits untouched, the more it can potentially
compound.
Another vital step: Determine an appropriate asset allocation --
how you divide your money among stocks, bonds, and cash -- for your
portfolio. This should be based on your financial goals, tolerance
for investment risk, and time horizon. Be aware that your asset
allocation will need to be adjusted periodically in response to
major market moves or life changes.
Once you're nearing retirement, it will also be necessary to
craft a solid plan for distribution of your assets. For example, do
you know one of the greatest risks that retirees face? The
possibility of outliving their money, according to the Society of
Actuaries.
That's why it's essential to determine an appropriate annual
withdrawal rate. This amount will be based on your overall assets,
the estimated length of your retirement, an assumed annual rate of
inflation, and how much your investments might earn each year.
Another consideration: After age 70½, you'll have to
begin making an annual withdrawal from some tax-deferred retirement
accounts (known as a required minimum distribution), including
traditional IRAs. Preparing for this phase ahead of time may help
reduce your tax burden -- especially if your annual RMD may push
you into a higher tax bracket.
Likewise, this is the time to make sure your final wishes are
accurately documented and estate strategies are well underway to
minimize your heirs' tax burden. As you can see, planning for the
different phases of retirement is a lifelong process. Following is
a list that can help you along the way.
Retirement Planning Checklist
Find the category that best describes you. After answering the
questions, bring the list to a qualified financial professional who
can help make sure your retirement plan is on target.
Saving for Retirement
- Have you performed a comprehensive retirement needs
calculation?
- Are you contributing enough to potentially reach your financial
goal within your desired time frame, by maximizing contributions to
tax-advantaged retirement accounts, such as your employer-sponsored
retirement plan and an IRA?
- Is your asset allocation aligned with your retirement goal,
risk tolerance, and time horizon?
- Have you determined if you might benefit from contributing to a
traditional IRA or a Roth IRA?
- Do you review your retirement portfolio each year and rebalance
your asset allocation if necessary?
Nearing Retirement
- Do you know the payout options available to you (e.g., annuity
or lump sum) with your employer-sponsored retirement account, and
have you reviewed the pros and cons of each option?
- Have you considered your health insurance options, (i.e.,
Medicare and various Medigap supplemental plans or
employer-sponsored health insurance), out-of-pocket medical
expenses, and other related health care costs?
- Have you contacted Social Security to make sure your benefit
statement and relevant personal information are accurate?
- Should you purchase long-term care insurance? If so, have you
investigated which benefits are desirable?
- Is your asset allocation properly adjusted to reflect your need
to begin drawing income from your portfolio soon?
- Have you determined an appropriate withdrawal rate of your
assets to help ensure that your retirement money might last 20, 30,
or more years?
- Have you figured the amount of your annual required minimum
distribution (RMD) and developed a strategy to reduce your tax
burden once you're required to begin taking RMDs?
- Have you appointed a health care proxy and durable power of
attorney to take charge of your health and financial affairs if you
are unable to do so?
- Have you reviewed all your financial and legal documents to
make sure beneficiaries are up-to-date?
- Are you making effective use of estate planning tools (such as
trusts or a gifting strategy) that could reduce your taxable estate
and pass along more assets to your heirs while also benefiting you
now?
Points to Remember
- Planning for retirement is a lifelong process. Determining your
retirement needs by identifying your potential retirement expenses
and sources of retirement income is an important step.
- Starting to invest early for retirement and contributing as
much as possible to tax-advantaged employer-sponsored retirement
plans and IRAs are two ways to leverage your retirement
dollars.
- Determining an appropriate asset allocation -- how you divide
your money among stocks, bonds, and cash -- is a time-tested
strategy for helping you pursue your financial goal.
- It's essential to determine an appropriate annual withdrawal
rate of your assets during retirement so you don't outlive your
money.
- After age 70½, you must begin making an annual required
minimum distribution from certain tax-deferred retirement accounts.
Preparing for this phase ahead of time may help reduce your tax
burden.
- Developing an appropriate estate plan is the important final
stage of crafting an effective retirement plan.
|
|
An agreement in which a grantor transfers assets to a trustee for the purpose of benefiting one or more beneficiaries.
A contract between an individual and an insurance company in which the individual pays money into an account in exchange for a guaranteed payment at or during retirement. Annuities offer tax-deferred growth potential. There are two types: fixed and variable.
An investment vehicle representing a loan to a corporation, government, or municipality. Generally, bonds pay a fixed interest rate and return the principal investment at maturity. Bonds issued by the U.S. government are guaranteed as to the timely payment of principal and interest if held to maturity; other bonds are not guaranteed and carry varying degrees of credit risk.
The process of dividing investments in your portfolio among different kinds of assets, such as stocks, bonds, real estate, and cash, to try to meet a specific objective.
A federal program that assists people aged 65 and older by helping to pay for health care expenses. The program has four parts -- Hospital Insurance (Part A), Supplementary Medical Insurance (Part B), Medicare Advantage (Part C, which is private insurance that combines Parts A and B), and Prescription coverage (Part D).
A retirement account to which you may be able to contribute up to a specific maximum amount each year (the maximum amount is determined by Congress). Individuals aged 50 and older may also make additional annual catch-up contributions (up to a specified amount as determined by Congress). Contributions are not tax deductible, but any growth is tax free and qualified withdrawals may be tax free. Certain holding periods and income restrictions apply.
Preparing for the orderly administration, management, and distribution of a person's assets and liabilities during one's lifetime and upon death. In addition to a will, an estate plan may include trusts, insurance, and other elements intended to carry out the wishes of the estate owner and improve the estate's after-tax value.
The potential for an investment's price or return to deviate from its expected price or return.
A retirement account to which you can contribute up to a specified amount each year (the maximum amount is determined by Congress). Individuals aged 50 and older may also be eligible to make additional annual catch-up contributions (up to a specified amount). IRAs give your money the potential to grow tax-deferred and, depending on your personal circumstances, contributions may be tax deductible (withdrawals prior to age 59½ may be assessed a 10% IRS penalty). Withdrawals from traditional IRAs are taxed at then-current rates.
A share of ownership in a company, typically traded on one or more exchanges. Owners of stock usually receive voting rights on issues affecting the company and may receive a portion of the company's profits in the form of dividends.
A legal document that grants authority to make medical decisions for another person if that person is incapacitated.
Leverage refers to the use of borrowed funds or debt in an attempt to enhance portfolio performance. For example, if a company borrows 75% of the money it invests in a $10,000 investment, and the investment returns 5% over a year, the fund has actually earned 20% (excluding interest paid to lenders) since it has only put up $2,500 of its own money, but has earned $500. However, leverage also works in reverse. In this same example, if the investment were to lose 5% instead, the company would have lost 20% of its investment.
An insurance policy that provides long-term benefits, including a broad range of health services for the chronically ill or disabled. Services may be provided on an inpatient, outpatient, or at-home basis.
An individual insurance policy for retirees that can help pay medical expenses not covered by the Medicare system.
Content is provided by S&P Capital IQ Financial Communications as a service to Wells Fargo. Copyright © 2013, S&P Capital IQ Financial Communications, a division of The McGraw-Hill Companies, Inc. All rights reserved.
|
|
