3. Create your second act
Just as important as your savings plan is your life plan in retirement.
“Reviewing your cash flow will trigger thoughts about how you want to spend your time in retirement and what income will be needed to support that lifestyle,” Doss says. “This brings the conversation down to earth from the sometimes intimidating 30,000-foot view of retirement planning.”
Would you like to spend your time traveling abroad, visiting family across the country, volunteering your time with a local charity, or playing golf every day? Doss says the planning process is also the time when people should consider where they want to live and whether they would like to help their children and grandchildren, for example, by helping pay for education costs or by making a down payment on a home.
But Doss also notes that many people discover their spending increases in the first few years of retirement. “As they adjust to their newfound freedom, retirees often schedule more lunches with friends, embark on the long-awaited home improvement project, and have the freedom and flexibility to travel,” so factor those plans into your retirement plan as well.
4. Adjust for ongoing changes
As you get closer to retirement, you and your wealth and investment advisors should consider how your assets are allocated.
Doss says to think about your assets as belonging to different buckets. Discuss with your advisors the order that you will tap into the buckets based on the types of assets in each bucket, the tax implications of liquidating each bucket, and potential growth of each asset. Most people will have a combination of pre-tax retirement plan assets (qualified) and after-tax savings (nonqualified). Plan carefully when deciding the order for withdrawing these funds to help reduce the market risk from tapping into those buckets.
5. Establish an estate plan
An estate plan can help your assets to continue to align with your values and priorities even after your passing. It can also help to spare your loved ones from significant stress and the potential for family conflict.
At a minimum, an estate plan should include a will, powers of attorney, and health care directives, Doss says. Depending on your needs, your plan also may include one or more trusts. Completing these documents and actually executing them can give you confidence that you have a structure in place for taking care of your loved ones should something happen to you. (For more, see “Essentials of Wealth Transfer.”)
“Most people cringe at the thought of planning for the day when they are no longer around,” Doss says. “But I feel that it is the best legacy that you can leave for your family.”