Retirement Planning Guide

Special Guest Blog – by Art Koff 

The misconception that all diamonds appreciate in value can hit boomers and retirees the hardest. Many clients of Diamond Lighthouse need help selling their diamond assets in order to pay off debt. According to a Fidelity Research Institute report, over half of boomers and retirees don’t plan their retirement and many end up struggling on a fixed income. The fact that cash from unworn diamond jewelry could be put towards an interest bearing financial investment is one of the many measures that can help. Making sound financial choices requires a road map.

We are pleased to share the following article Retirement Planning Guide by guest author and personal finance expert Art Koff, founder of RetiredBrains.com, frequent contributor to MarketWatch and author of the eBook, Lifetime Planning Guide: Resources for Boomers & Seniors. His guide begins with a checklist which will give you an overview of what a professional financial planner might ask and includes many tips on preparing you for a stress free retirement path.

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Retirement Planning Guide

by Art Koff

What must I know to plan for the future or even meet with a retirement planner?

  • What is my total net worth?
  • What am I spending each year?
  • What are my sources of income?
  • What kind and how much life insurance do I have?
  • What expenditure changes do I plan after retiring?
  • Is my estate planning up to date
  • Are my will and health care issue documents current?
  • Have I named the proper beneficiaries for insurance and retirement accounts, etc.?
  • Does my family have access to where all documentation is located?
  • Does my family know my wishes if I am unable to act or die?

People around the world are living longer. This means there is an increased likelihood they will outlive their retirement savings. Retirement planning and income consists of:

  • Investments
  • Social Security
  • Pension
  • Profit-sharing
  • Income from work after “retirement”
  • Tapping home equity

Areas to consider

  • Monthly expenses like rent, mortgage payments, food, clothing, insurance etc.
  • Special expenses like vacations and one time purchases, etc.
  • The inflation rate
  • Taxes owed
  • Give special consideration to Financial planning
  • Asset protection
  • Reducing expenditure/modifying lifestyle
  • Living Longer

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Current mortality tables show that an average healthy American male at age 65 today can expect to reach approximately age 85 – but that same individual also has a 50% chance of living beyond age 85 and 25% chance of living beyond age 92. As a result, people who plan to cover their economic needs to their “life expectancy” – in this case, age 85 – still face a 50% chance of failure. The Wharton study explains that only lifetime income annuities can mitigate the financial risk of living too long by relieving consumers of the need to set aside the far greater sums they would otherwise need to allocate to other asset classes to ensure they would not outlive their retirement savings.

Retirement Calculator 
To reach a retirement calculator (automated on-line retirement planning) and personalized information on retirement strategies  go to https://www.newretirement.com/retirement-calculator/default.aspx

In addition to having a warm climate, Florida, Texas, and Nevada are popular retirement destinations because they are three of the nine states that do not have a state income tax. FYI California has a top marginal state income state rate of 13.3%.

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State income tax is only one consideration in choosing a retirement location; sales and usage tax, property tax, and estate tax, as well as how states tax retirement benefits should be considered.  In Illinois, for example, the state’s 5% income tax does not apply to Social Security income; distributions from IRAs, 401(k)s, and other qualified retirement plans; and qualified pension plans. Your financial adviser should help you evaluate all of this information prior to your considering remaining in the state in which you live or relocating.

Retirement Calculators

Here is a link to several retirement calculators in many different areas including: loans, savings, annuities, rate yield, retirement withdrawals, etc. click retirement calculators.

Singles need more money

According to the American Academy of Actuaries singles need 40% more than couples to maintain the same retirement lifestyle as it costs one person about 75% of what two would pay.

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8 Mistakes you must avoid when planning your retirement

1.    Thinking estate planning isn’t necessary.
2.    Underestimating life expectancy.
3.    Miscalculating inflation.
4.    Believing you’ll retire when you expected to.
5.    Failing to coordinate with your spouse.
6.    Not finding a cost effective retirement place
7.    Thinking most medical expenses will be covered by Medicare.
8.    Missing Medicare deadlines.

Errors in Retirement Planning for High Income/Net Worth Individuals

If  you are a high income/net worth individual you are likely to spend less, percentage-wise, during retirement than those with incomes a good deal less than yours.

Most online calculators assume you will need between 70% and 80% of your pre-retirement income to live the lifestyle you anticipate during your retirement years.

Many of the expenses you had during prior to retiring are likely to be substantially less after you retire. You will have:

No costs for your children’s education.

No contributions to your retirement fund.

No taxes to pay on Social Security, Medicare, income.

Less costs of entertaining and eating out.

Less wardrobe expenses.

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Discuss this list with your spouse to make it as accurate as possible and then with your financial planner, accountant and attorney to adjust expected expenditures against realistic income/revenue expectations. Make sure your list of assets is complete and valuations are accurate and check to see if you will need to draw against them and if so, what the estimated yearly amount is. Project these numbers out with your financial advisor to insure you will have enough to last and if not, either continue working longer or adjust your projected lifestyle expenditures in retirement.

As with all important financial decisions, it’s best to get advice from a professional before making any impactful financial planning changes.  Properly utilizing all of your money’s potential can make a dramatic difference in the quality of your day to day living, as well as increase your estate’s value for future generations.  Plan ahead and benefit you and your loved ones.

*See our article I Want to Sell My Diamond – But Will I Get Killed on The Taxes?

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