Over the years, ProVise has literally helped thousands of clients to prepare for and enter into retirement. You are likely doing it for the first time. It may seem a bit overwhelming so having an experienced guiding hand from a CFP® professional with ProVise may be helpful.
Building a sizable nest egg is a great goal to start planning your retirement, but there should be more that goes into it than having a lot of money set aside. Like all good things, a smooth retirement requires both preparation and commitment.
Compare your retirement planning to planting a garden. In both cases, the first thing you need to do is envision what you want the end result to look like. Only then can you layout the garden, prepare the soil, plant the seeds, and tend to the plants as they grow, working through things like heat and frost that may set the garden back a season. The same goes for your retirement.
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Generating income during retirement
During the years prior to retirement, most people focus on growing their asset base. You save money inside retirement plans and outside them. The important aspect of the financial plan at this point in your life is your balance sheet – how much are you worth.
Once you have reached the point in life when you are ready to retire, your focus needs to shift to how can these assets support your life and lifestyle. The important part of the financial plan at this stage of your life shifts from your net worth to your income statement – how much cash flow will you generate from your investments, Social Security, and pension.
Generating income from your investments during retirement largely has to do with creating a portfolio that generates regular recurring dividend and interest payments, then making smart withdrawal decisions. For example, many retirees follow the 4% principle, which is withdrawing 4% of their retirement funds during their first years of retirement. In a balanced portfolio of stocks, bonds and cash, regular dividend and interest payments should account for a good portion of that 4%, positioning you to maintain your purchasing power throughout retirement and lowing the risk that market fluctuations will upend your plans.
However, it is important to stay flexible and know when to make smaller withdrawals or when it might be okay to make a larger one. Having a vision in place before retirement and planning to be flexible during rocky or positive investment seasons can help you make smart withdrawal decisions.
Living off your Retirement Funds
If you want to live off the cash flow created by your assets, you need to know how much is safe to spend and how to manage your portfolio. When you are preparing to enter retirement is the perfect time to start making a budget for how much you want to spend each month without exhausting your funds.
Applying for Social Security when retiring
Hopefully, you checked your Social Security earnings each year on-line to make sure they were recorded properly. If you have not done that, be sure to do so before applying. Once you have reached retirement age, you are entitled to receive Social Security benefits. However, the Social Security Administration is not going to reach out to you and tell you when to start your application. This is something you need to start yourself.
While applying for Social Security is relatively easy, the decisions that need to be made can be challenging. Some of the questions you might be curious about include: What are the pluses and minuses of starting early? Should I wait? How long? Do I have other sources of income that will make those payments taxable? If I work in retirement, how will that affect my benefits? Here are some of the basics:
- Make sure you are eligible — You must be at least 62 years old before meeting the minimum age requirement for applying for Social Security. However, if you take your benefit prior to your full retirement age, it will be reduced and may also be adjusted if you have too much earned income. This chart from the Social Security Administration can help you find your correct age requirement. If you delay taking Social Security past your full retirement age, you will increase your benefit by about 8% per year, but at age 70 your maximum benefit is reached. The decision about when to take Social Security is further complicated by your health, income, marital status, etc.
- Have the correct documents ready — You will need your Social Security card, birth certificate, proof of citizenship and other pertinent information.
- Apply — You can apply for Social Security online or visit your local Social Security office to begin the process.
- Calculate your earnings — It helps to know what to expect from your Social Security benefits before completing your application. You can use the Social Security Administration’s Retirement Estimator to get an idea of what you will earn if you apply now.
Applying for Medicare benefits
Your Medicare coverage is separate from your Social Security benefits, so you need to make sure to apply for this as well once you have reached the age of 65, whether you have retired or not. People with certain disabilities may qualify for Medicare coverage at a younger age. Take a look at this document from the Social Security Administration to learn if you are eligible for early Medicare coverage.
Medicare is available in four different parts (Part A through Part D), each detailing a different level of coverage you may select if you are qualified. It is important to review the different Medicare options and make the choice that best suits your circumstances medically and financially. We will help you determine the best options, not only from an insurance viewpoint, but a financial one as well. In spite of what you might have heard, Medicare is not free.
Long-term care insurance
We hope you get to enjoy most of your retirement years with the freedom to live as you please. However, the reality is that one day you may need to live in a long-term care facility as you advance in years. You can prepare for this time by purchasing long-term care insurance that helps cover the costs of in long-term care facility and/or at-home assistance.
One of the downsides of long-term care insurance is that it can be expensive, but for many people, the price is worth the outcome. As part of your preparation for retirement, you should consider long-term care insurance and whether it is a worthwhile investment for you without exhausting your retirement funds.
While it is not the most pleasant topic to think about, we all have to recognize that we cannot live forever. With this in mind, it is important to have a plan in place for your assets and your loved ones after you pass away.
A ProVise CFP® professional, along with your attorney, can help you develop and maintain an estate plan that manages and distributes your assets according to your wishes in the event of your death or the transfer of your assets with a living estate plan.
Prepare for your retirement with the help of a ProVise CFP® professional
Preparing for retirement may seem like a complicated undertaking, but with the assistance of a ProVise CFP® professional, it does not have to be. Our skilled and experienced financial advisors can work closely with you to assess your financial circumstances and your retirement goals to help you draft a plan to reach these goals.
The financial plans we create are always personalized according to your individual circumstances, goals, values and risk tolerance. We offer plans at a fiduciary standard of care with an unconditional money-back guarantee if you are unsatisfied with your written plan for any reason. Just return it to us, and we will refund 100% of the fee paid.
Are you ready to take the next big step toward planning for retirement stability with the help of a ProVise CERTIFIED FINANCIAL PLANNER™ certificant? Contact our team today to schedule a consultation.
What to expect in a complimentary consultation
A 30-minute complimentary consultation with ProVise Management Group is different from what you may have experienced with other financial planners. In this meeting, you'll speak with a CERTIFIED FINANCIAL PLANNER™.
We want to know more about your goals and place in life than how much money you have in your accounts.
We would be happy to meet you in person at our Clearwater and Tampa offices or schedule a Zoom call.
Here’s a quick snapshot of how our consultation works:
What prompted you to contact us?
Is it a new job with a complex compensation plan, the formation of a new business, a birthday that makes retirement feel more imminent, an inheritance, the death of a spouse or another event?
What are your goals?
We'll discuss your objectives for your finances and retirement and diagnose any potential issues that may be keeping you from reaching your goals.
Here's how we can help
We’ll tell you about us and how we work, including the services we offer and our fee structure. Then, we’ll give you the time and space you need to decide if you want to work with us—and when you’re ready, so are we.
Schedule a Complimentary Consultation
Financial planning is not one big thing…it is hundreds of little things™. We will walk with you every step of the way through investments, debt payoffs and everything in between to help you reach the financial goals that matter most to you.
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