8 questions to ask yourself before you retire

This article was co-written by Kyle Griffith.

Although it’s technically viewed as “ceasing to work,” everyone has his or her own definition of retirement.

To one person, it could mean moving somewhere warmer or hitting the golf course every day. To another, it could be spending more time on hobbies, and to someone else, it could mean traveling the world.

Regardless of your vision, have you examined how to translate your vision into a financial plan for retirement?

Here are eight questions everyone should consider as they near retirement:

1. How will you fund your living expenses in retirement?

Compared to previous generations, saving for retirement is vastly different.

Pension plans are becoming close to non-existent, and Social Security will likely not provide enough income for most retirees to live.

That means you’ll need other sources of cash inflows, such as investments or your 401 (k).

As a general rule of thumb, it may be prudent to spend after-tax investment assets before tapping into 401(k) and individual retirement account (IRA) assets. This generally allows retirement accounts to continue to grow tax-deferred (or tax-free, depending on the account).

No solution works for everyone. It is important to consult with your tax advisor to determine what strategy works for you and your definition of retirement.

2. When and how should you start taking Social Security?

The conversation isn’t as simple as taking your Social Security before, at or after full retirement age (FRA) anymore; therefore, it’s crucial to seek out a financial advisor who has a good understanding of the Social Security system and can explain all of the benefit strategies that are available to you.

In addition to meeting with a financial advisor, you can also schedule an in-person meeting with a representative at your local Social Security Administration (SSA) office. Lastly, if you were born before January 2, 1954, there’s a very beneficial strategy you can take advantage of called the Social Security restricted application. Learn more about how the strategy and the eligibility requirements here.

3. What is your plan for health insurance?

Having affordable, quality healthcare is important for retirees.

If you sign up for Medicare during the initial seven-month enrollment period that surrounds your 65th birthday (i.e., three months before your birth month, during your birth month and three months after your birth month), you will avoid financial penalties.

Higher premiums may be the result of late enrollment in both Part A and Part B of Medicare.

Before you start the process, be sure to consult the Medicare website, as it provides a lot of helpful information about how to enroll in Part A and Part B.

In the years leading up to retirement, you should also consult with your financial advisor to determine whether long-term care (LTC) insurance makes sense for you.

LTC insurance usually makes sense for people who have a family history of health problems that require substantial long-term medical care, such as Alzheimer’s disease. Even if you are at risk, you may want to consider the risk of “self-insuring” in the event that you eventually need coverage.

If you decide to acquire LTC coverage, keep in mind that the premiums can be pricey and tend to get significantly more expensive once you have passed your late 50s or early 60s.

If you have a permanent life insurance policy containing cash surrender value, exploring a potential tax-free exchange for a new life insurance policy with a long-term care component is a sophisticated method, if executed properly, used to supplement the cost of long-term care in retirement. Read more on the subject here.

4. What do we need to know about required minimum distributions?

A required minimum distribution (RMD) is a minimum amount you may be required to start withdrawing from select retirement assets each year once you reach age 70½. With the passing of the SECURE Act, beginning January 1st, 2020, the age at which you need to begin RMD’s will be 72 — contributions and distributions made for tax years after Dec. 31, 2019.

The amount is different for every retiree because it is based on the value of your account and your life expectancy. That means you may end up with more cash inflow than you need. If this is the case, you can keep the excess assets in cash or reinvest them in an after-tax account.

The IRS website provides helpful information regarding the differences in RMDs between various types of retirement accounts.

5. What can I do to try and protect myself from identity theft?

Retirees are often one of the most targeted groups of individuals when it comes to identity theft. Scammers will often try to take advantage of the retirees through selling investments that may sound too good to be true, Ponzi schemes or fraudulent Medicare advice.

One of the best ways to try and determine if a new investment opportunity or financial decision could be a scam is to conduct due diligence. Research the investment professional or the contractor that is offering you their services or products and ensure that they are a credible, verified professional.

Keeping other trusted individuals aware of your financial decisions can help lend a different perspective to a decision you’re contemplating. Oftentimes, a new set of eyes on a decision can point out potential opportunities for fraud that you may have overlooked.

Make sure you are up to date with keeping yourself protected in the cyber space.

6. Is your investment portfolio not allocated properly?

In the years leading up to retirement, you should explore whether an investment allocation (i.e. the breakdown between stocks, bonds, and other types of investments in your portfolio) change makes sense for your situation. Typically, as people get closer to retirement, they prefer to take less financial risk, so they reduce the percentage of stocks in their portfolio.

The answer to the question of whether to change your asset allocation depends on a number of different factors, including how long you expect to live off of the assets, your need for portfolio income and your overall savings at the time of retirement.

In addition, you may want to do a quick gut-check assessment: and ask yourself if your portfolio dropped 10% to 20%, would you be able to sleep at night? If the answer is “yes,”, a change may not be necessary; but if the answer is “no,” you should discuss your allocation and any possible changes with your financial advisor.

7. What do you need to know about moving in retirement?

There are many factors, both personal and financial, to consider when planning around where you want to live out your retirement. It’s important for retirees who are considering moving in retirement to choose a location that fits with your definition of retirement — whether to be conducive for traveling, allows you to enjoy your hobbies or is reasonably close to major healthcare facilities.

From a financial perspective, certain states do not tax retirement income (from a traditional 401(k) or traditional IRA, for example) and other states don’t have a state estate tax.

While we recommend preparing an estate plan with an attorney to plan around reducing your estate tax exposure, if you want to leave behind a substantial legacy then there are some states which are more tax-beneficial than others.

8. What would happen if you died today?

Death is a difficult topic for a lot of people, but it is important to have a plan in place to ensure that your wishes are granted.

As you ease into retirement, you should review your estate plan, as well as the beneficiary designations on your financial accounts.

But don’t stop there. Your wishes and family situation may change as you age, so it’s crucial to review your estate plan on a regular basis to ensure that everything is up-to-date. Here is a list of estate planning tasks you can start tackling today.

Ready to start planning your retirement with purpose? Reach out to our advisory team and start designing your future.



8 questions to ask yourself before you retire

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at www.adviserinfo.sec.gov. Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Marshall Lund

CFP® | Financial Advisor

Marshall Lund, CFP®, is a Financial Advisor with Wipfli Financial Advisors in Chicago, IL. Marshall focuses on personal financial planning and investment advisory for high-net-worth investors and families.

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8 questions to ask yourself before you retire

time to read: 5 min