With the pandemic well underway, you may be taking a second look at your retirement plan. Will you have enough income to retire? Can you afford your taxes? What about healthcare? Have you reviewed your estate plan? More and more questions may be surfacing as the world changes around us. To help navigate through this uncertain time, here are 6 ways to assess your retirement plan during the pandemic.
1. Dial Down Your Risk
In mid-March when the stock market plunged, many investors hurriedly checked to see if their portfolio could handle the risk and what their next move would be? Even as the market is showing signs of recovery, are you willing to risk it all again? Now is the time to examine the risk being taken with your investments and choose ones that actually match your risk tolerance levels.
2. Review Your Estate Plan…Update If Necessary
The pandemic has reminded us that life is precious and unpredictable. An estate plan gives you the option to settle your affairs without letting the State step in. Anyone who owns anything needs to determine who should receive these items upon death. Some of the most important components of an Estate plan include the Power of Attorney and Living Will documents. For more complex situations such as providing for a disabled child or having to pay significant taxes at death, it is essential to take the needed steps to create an estate plan or re-evaluate your current one if you have not done so already.
3. Diversify, Diversify, Diversify…With Thoughtfulness
Diversification works because it combines different types of assets to give you the highest return with the least amount of risk. Proper diversification is like an all-weather tire, giving you confidence no matter where you travel or how the stock market performs. Determining how to diversify depends on your age and goals. Younger folks have time to ride the waves, but when closer to or in retirement, diversification means something else. Generally, a diversified portfolio includes both safe and risk allocations along with long and short term allotments. A fiduciary advisor is the best one to guide you into proper asset diversification.
4. Coordinate Your Investments to Be Tax-Efficient
Oftentimes one’s investment professional does not communicate with one’s tax professional. When this occurs, it is the client who gets hurt and pays more tax than necessary…For example, one can receive dividends, re-invest, and pay tax on them. Why should you pay tax on the money you are not spending? During these challenging times, tax-efficient investing is one way to eliminate avoidable tax.
5. Conduct a Study to Determine If You Are Retire Ready
For some, the pandemic has upended retirement plans. If you are considering retirement in the next few years, you can conduct a study to see if you have sufficient assets to allow you to retire with confidence. Consider these questions when you are thinking about retirement.
– Are my debts paid off?
– Do I have ample savings?
– What are my fixed expenses?
– Is my healthcare covered?
– Can I live on a budget?
– Will my taxes be affordable?
If you have any doubts, request an office appointment with Cowen Tax Advisory Group for a “Road To Wealth” Illustration to see if you are financially ready or will need to accumulate more assets to retire.
6. Review Your Medicare and Long-Term Care Needs
Along with taxes, healthcare can be one of the largest expenses to drain your retirement nest egg. Make sure you are paying the lowest Medicare premiums possible while maintaining the best benefits including seeing the Doctors you like and having your meds covered. Consider examining your current and future medicare planning needs with a Medicare Insurance Advisor.
The pandemic crisis has reminded us how fragile our health can be and how important it is to maintain good health. Unfortunately, though, statistics show that almost half of us will experience a long-term care health episode after reaching age 65. It is vital to know your options regarding long-term healthcare and how to pay for it. The long-term care insurance industry has changed dramatically this past decade and it is worth your time to educate yourselves.
Do you need help re-evaluating or creating a retirement plan? Contact us for a no-cost/no-obligation consultation with Cowen Tax Advisory Group, your one-stop-shop for all your retirement needs. You can also reach us by phone at 860-676-1100.
