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Preserving Your Wealth
You have spent a lifetime working hard and accumulating assets. Whether that's a multi-million dollar estate or your home and an IRA, there comes a time when you need to look at protecting your hard-earned wealth. The following information will help you maximize your money during retirement and minimize the effect of taxes on the assets that you leave your family.
Living In Retirement
Today, many Americans live as retirees for as many as 20 to 30 years. With the chance to do more and enjoy more comes the added task of making wise use of your assets, so you can maintain your desired standard of living during those years.
Whether you have already retired or are about to join the ranks of retirees, the following are common primary financial concerns:
Outliving assets
Keeping up with inflation
Protecting money from unnecessary taxes
Preparing for potential long-term care expenses, which can be financially devastating
Providing a legacy for your heirs
The following are a number of good strategies to help you manage your assets during retirement while addressing the above financial concerns.
Assess the Life of Your Assets
Because we spend most of our pre-retirement years focusing on the accumulation of funds for retirement, many of us forget to determine just how long our nest egg would last. Have your income needs shifted since you started saving? Did you calculate your income using a realistic life expectancy?
It's smart to reassess your situation once a year prior to retirement, and as your retirement date approaches, start to more actively monitor your assets, and the income they may provide as your situation and market conditions change.
Better Understand Risk
Most people think of risk in only one way, losing their principal, so they put their money in extremely conservative investments. While principal loss is certainly something to be concerned about, there are other kinds of risk.
For example, when you are invested exclusively in fixed-rate products, inflation may erode your buying power, and a drop in interest rates can put your income stream at risk. Diversifying your investments can help address these issues.
Determine Your Most Appropriate Asset Allocation
Asset allocation involves balancing your portfolio by investing in various types of investment categories. To do this effectively you must consider your age, resources, goals, risk tolerance and tax bracket. Once you and an advisor have determined the most appropriate asset allocation for you, you may need to restructure your investment portfolio. Diversification is an effective strategy to both potentially decrease your risk exposure, and increase your earnings potential.
Tax Planning
Use appropriate tax planning strategies to preserve as much of your income as possible. A tax advisor can help you identify how much money you are required to take from your retirement savings and if your social security benefits are taxable. If taxes are a concern, you can work with your financial advisor to establish suitable tax-efficient investments.
Evaluate Your Insurance Needs
Do you still need life insurance for the death benefit or as an estate-planning tool? Is it time to invest in long term care insurance to protect your assets? These are some of the questions that your financial advisor can help you answer.
Review Your Estate Plan
Review your estate plan at the outset of your retirement. Because estate plans can be a "do it and forget it" project for many, taking the time to make sure the right people will inherit your assets the way you want them is key.
Newly retired individuals can be so focused on their new lifestyle, that they can easily forget the importance of that plan until a life event, such as major illness occurs. And, because many estate tax laws specifically look to recapture "assets transferred in anticipation of death," it is essential that you've reviewed your plan before a major event occurs.
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