Retirement can be a new beginning, the start of a chapter of your life where you can focus on achieving personal fulfillment, spending more time with loved ones, and pursuing your passions.
It’s a chapter that’s getting longer. According to the U.S. Social Security Administration, those who reach age 65 today can expect to live about 20 more years, on average.
Getting the most out of retirement depends in part on feeling more confident about taking on the things you want to do while being financially prepared to create the kind of exciting chapter you hope for. Having a solid retirement plan could be key.
Catrina Crowe, senior wealth planning strategist with Wells Fargo Private Bank, has seen this firsthand with her clients. “With a sound retirement plan in place, I’ve seen clients have more time to spend with their children and their grandchildren, more time to pick up new hobbies or learn new skills, and more time to get involved in educational, cultural, or philanthropic activities,” Crowe says.
To help build a financially secure retirement future — one that supports the life you want while still maintaining your legacy plans — consider these four key strategies.
1. Review your retirement plan regularly. As you near retirement, accurately predicting your spending related to your goals can help you make sure your wealth lasts.
Part of that prediction comes from reviewing your retirement plan at least once a year, comparing it with your known spending and your goals, then making adjustments if needed. This can be especially important during times of crises such as the coronavirus pandemic, which could impact both your income and your expenses.
If your life situation or your goals have changed, it may be even more crucial to revisit your plan. Perhaps you welcomed new grandchildren or decided to invest in a new business. Ask your wealth planner if that means you should discuss the changes sooner or wait until your next scheduled annual checkup. Crowe likens reviewing your retirement income plan to getting an annual physical — even if you feel the same or better than last year, you should still get a checkup.
“A long-term plan takes into account highs and lows,” Crowe says.
2. Stay diversified. Crowe says the coronavirus pandemic underscored the importance of having a diversified portfolio. During times of volatility, a diversified portfolio may help smooth out the peaks and valleys in the market.
She also advises creating multiple streams of income, if possible, from diverse holdings in your portfolio. Most of her clients have a workplace plan, Social Security, and an individual retirement account. It may be beneficial to add new strategies. Examples include investing in commercial real estate to provide passive income, or turning owned real estate into something that can generate rental income. Crowe says social impact investing can also help you receive income in retirement while supporting causes you care about.
3. Plan for health care costs. Planning for unforeseen circumstances is essential in a sound retirement plan, which includes making preparations for health care costs in retirement.
Work with your wealth planner to come up with a realistic estimate of your health care expenses. If you’re covered by a high-deductible health plan, you may want to consider putting some money into a tax-advantaged health savings account (HSA) while you’re still working. That way, you can save for future and current medical expenses.
Getting long-term care insurance might be worth considering, as well. That’s because most Americans older than 65 will need long-term care at some point, according to the U.S. Administration on Aging. Long-term care is generally defined as a wide range of services that people may need if they’re chronically ill or disabled.
Before you retire, make an educated decision on what’s right for you. The best time to purchase a policy is when you’re in your 50s or 60s.
4. Consider wealth transfer in your lifetime. The Tax Cuts and Jobs Act of 2017 doubled the estate and gift tax exemption until 2025, so this could also be a good time to transfer assets. Initiating a wealth transfer while you’re still living gives you the chance to have a positive impact on your loved ones’ lives, whether it’s helping your child buy a first house or invest in a new business. (Learn more about the essentials of wealth transfer.)
Philanthropy is another option — your advisor can share the pros and cons of different types of charitable giving, including helping you understand your choices from a tax perspective and helping you align your contributions with your values. “Seeing how your donations make a difference has been really meaningful for some of our clients,” Crowe says.