Many retirees need to know how to transition from the phase of saving for retirement to the phase that provides reliable income during retirement. Proper planning can ensure that your retirement will be full of joy and stress free.
The answers to this complicated question were addressed in a recent article by Karin Price Mueller of The Star-Ledger. She interviewed a financial planner who offered some great advice. To begin, retirees need to protect what they have, be aware of taxes, and develop an estate plan to ensure a reliable stream of income exists throughout retirement. They also need to become comfortable living off their finite investments and can do so by creating what the financial planner called a “paycheck” from their investments.
Tax implications seem to be around every corner and an overall estate plan should touch upon them. Couples who do not have a ROTH IRA should think about a conversion. Factors in making that decision include money available for immediate living expenses and available cash to pay for conversion taxes outside of a retirement account.
When planning for a conversion, retirees should ensure the conversion does not increase their income because they do not want to be put in a higher tax bracket as a result. Partial conversions over time are generally better than total conversions and can help avoid the jump to a higher tax bracket.
In regards to estate planning and assets, people should review their asset title and beneficiary information. Wills do not always control the distribution of major assets. Beneficiary designations and asset titles may control the distribution instead. IRA’s and life insurance have beneficiary elections regardless of what the will says. IRA’s and life insurance instruments are usually considered contracts separate from an estate.
Similarly, ask an expert and learn about the implications of joint accounts and property within your estate. Joint accounts and property owned as “Joint Tenants with Rights of Survivorship” will not pass through a will. As with most things in life, proper planning will help ensure retirement is as predictable as possible.
Source: The Star Ledger, “Retirees Hope to Travel, Contribute to College Funds,” Karin Price Mueller, 9/12/10