STAYING INDEPENDENT
Planning for financial independence in later life
TAKING STOCK
As retirement approaches, it is important for every household to assess its financial identity (assess its finances). Waiting too long might mean missing one or more opportunities to preserve maximum financial independence in the future. To help get you started, can you say 'Yes' to the following statements?
YES NO We talk regularly and frankly about finances and agree on our goals and the lifestyle we will prefer as we get older.
We know our sources of income after retirement how much to expect from each, and when.
We save according to plan and are shifting from growth-producing to safe income-producing investments. Senior Lending Network
We know where our health insurance will come from after retirement and what it will cover.
We have reviewed our life insurance and considered options such as converting to cash or investments.
We each have our own credit history.
We each have a current will or living trust.
We know where we plan to live in retirement.
We have anticipated the tax consequences of our retirement plans and of passing assets on to our heirs.
Our children or other responsible relations know where our important documents are and whom to contact if there are questions.
We have executed legal documents, such as a living will or power of attorney, specifying our instructions in case of death or incapacitating illness. Senior Lending Network
THE KEY IS PLANNING
'If only I’d known then what I know now ....'
Looking to the future is key to financial planning at any age, but especially in the decade or so before retirement. For many households, retirement is a time to fulfill dreams and delayed ambitions. It also can be a time of anxiety if you postpone thinking realistically about the ways your financial identity will change--income, savings, investments, credit, insurance, job benefits, and perhaps living arrangements. Meeting the challenge of financial management will help remove uncertainty and increase your available options. Both partners need to be involved in retirement planning and may wish to discuss their plans with adult children.
Many people neglect planning. Some prefer to leave financial decisions to the other partner, while others simply find it too difficult to talk about money. Whatever the reason, if you have not yet begun planning, you may want to seek pre-retirement planning advice from a professional or a community service organization.
LOOKING AHEAD
The decade before retirement is a good time to take inventory of assets and obligations and make financial choices aimed at maximizing future resources. These years are typically a peak earning period and they offer the chance to reduce major debts, such as a home mortgage, and increase savings and income-producing investments. Households faring the combined expenses of educating children and caring for aging parents may find saving difficult during pre-retirement years. In these cases, making a realistic financial appraisal is more useful. These are questions you might ask yourselves:
* What are our sources of retirement income and how much will each provide-monthly or in a lump sum?
* Social Security
* Pensions, IRAs, Keoghs
* Savings and investments
* Sale of assets
* Home equity
Find out all the options for receiving your pension benefits and whether they are insured. Find out if pension benefits will be reduced if you receive Social Security. Read carefully and consider the consequences of signing any documents relating to a reduction in spousal pension benefits. One of you may need this income if the other dies.
When estimating how much income can be expected from these and other sources, remember to take inflation, taxes, and market fluctuations into account. Depending on your anticipated income potential, you may decide to postpone retirement a few years, or plan to work part-time.
