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Retirement Planning: Beyond the Projection

Retirement Planning: Beyond the Projection. Basic Course. Course Objectives. Define and Describe: Retirement the changing nature of retirement the financial and emotional aspects of preparing for and living in retirement today’s Retirement Planning Process

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Retirement Planning: Beyond the Projection

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  1. Retirement Planning:Beyond the Projection Basic Course

  2. Course Objectives Define and Describe: • Retirement • the changing nature of retirement • the financial and emotional aspects of preparing for and living in retirement • today’s Retirement Planning Process --assumes basic CFP course knowledge--

  3. Retirement Concept What is your idea of Retirement?

  4. Are these people retired? • Michael Dell • Warren Buffett • Oprah Winfrey • Bill Gates • Clint Eastwood

  5. Are these people retired? • 20-Year Career Changer back in school • Downsizer running Bed-and-Breakfast • 70-Year-Old Consultant • 25-Year-Old with Trust Fund income • 50-Year-Old who golfs and volunteers

  6. Retirement How do we remove the ‘baggage’ and include those with financial freedom who ‘Work’?

  7. Shizma (…is the new Retirement ) The point in time where earned income is not the driving factor for personal decision making

  8. Shizma retirement Planning Process Goal Development Data Gathering Analysis Implementation Maintenance

  9. Goal Development • Spouse/Partner Goal & Expectations Alignment • Envisioned Life • Legacy

  10. Spouse/Partner Goal and Expectation Alignment • Retirement can be as big a transition as getting married • New negotiation on how to relate to each other • Goals may not be the same

  11. Envisioned Life • Limits of visioning process • Replacing benefits of working • Retirement life not static • Permission to try new things • 3 phases of retirement • Go go/ slow go/ no go

  12. Visioning Tools • Proprietary Systems • Kinder Institute • Money Quotient • Financial Life Planning • Free Tools • Civic Ventures • Mind Mapping Software • Wheel of Life

  13. Legacy • Money • Tangible Assets • Values and History

  14. Goal/Vision Attributes • Retirement Shizma Date • Retirement Shizma Living Standard • Initial Retirement Shizma Location • Retirement Shizma Spending • Future Parent/Dependent Support • Legacy

  15. Shizma retirement Planning Process Goal Development Data Gathering Analysis Implementation Maintenance

  16. Basic Data • Insist on Primary Documents • Statements (taxable, retirement, social security) • Estate documents (will, healthcare directive, DPOA for finance) • Insurance policies, declarations and statements • Tax returns • Red Flags indicate a situation requiring advanced knowledge

  17. Special Emphasis • Hidden Assets and Liabilities • Asset Attributes and Cash Flow • Recent or Upcoming Transitions • Personal Concerns • Risk Tolerance

  18. Hidden Assets & Liabilities • Assets • Savings Bonds • Collections (e.g., coin, gun, baseball cards) • Jewelry or Art • Gold or silver coins • Investments or family heirlooms? • Future Inheritance? • Liabilities – e.g. deferred maintenance

  19. Traditional IRA Attributes • Have non deductible contributions been made? • Primary beneficiaries? • Contingent beneficiaries? • Individual contributions, rollover or mix? • Is a trust primary or contingent beneficiary? • Inherited?

  20. Defined Benefit Pension Attributes • Benefit Formula/ when eligible • Survivor Benefits, Options and Cost • Payment adjustment formula • Federal, State or City pension where Social Security was not paid • Previously married for 10 years or more

  21. Defined Contribution Plan Attributes • Employer match and profit sharing • Primary and Contingent Beneficiaries • Per stirpes or per capita • Allows stretch for non-spouse beneficiary? • Contains employer stock

  22. Life/Disability/LTC Insurance Attributes • Life insurance? Beneficiaries? • Long term care insurance? • Disability insurance? • Insurable? (existing medical conditions) • Permanent life insurance policy? • Business owner?

  23. Property & Casualty Insurance Attributes • Home in hurricane, flood or earthquake zone? • Existing or previous lawsuits • Business owner?

  24. Health Insurance Attributes • Plan Type/Cost Post-Employment • HSA • Employer retiree health benefits • Self employed • Considering retiring before age 65? • Insurable? (existing medical conditions)

  25. Variable Annuities Attributes • Purchase Date? • Basis? • Guarantees? • Is it Currently Adding Value?

  26. Gathering Income Data • Current/Post-Employment Income • Previous Years’ Tax Returns • Rental Property • Pensions /Annuities • Trusts • Limited partnerships • Businesses

  27. Gathering Expense Data • Client Provided • Watch Accuracy! • Help Client Add Periodic Big Ticket Items • Home repair (new roof, painting, etc.) • New cars • Medical • Credit Card Bills and Checking Statements • Help Client Use Quicken or MS Money • Financial Independence of adult children

  28. Career change Business sale Education Grandchildren Divorce Marriage Adoption/Birth Parent Incapacity Parent Death Inheritance Spouse Incapacity Spouse Death Loss of drivers license House bound Recent/Upcoming Transitions

  29. Lifestyle Risk Tolerance • Beyond volatility tolerance • What minimum spending level can the client tolerate during retirement?

  30. Shizma retirement Planning Process Goal Development Data Gathering Analysis Implementation Maintenance

  31. Can I afford to retire? Retirements can almost always be ‘afforded’. Will the affordable retirement be what they have in mind? Help client define Shizma Retirement.

  32. Analysis • Assumptions • Balance Sheet Analysis • Cash Flow Analysis

  33. Required Assumptions/Initial Goals • Rates of Return • Inflation • Medical Inflation • Tax Environment • Life Expectancy

  34. First Things First Determine: • expected expenses • assets available to support spending • sustainable withdrawals available to support expenses  • Consider 3.5 – 5.5 % initial withdrawal ‘rules’ Iterate until a plan is acceptable. • Will the client continue to earn? part time?

  35. Role of Social Security concern about future viability taxation of benefits Medicare payments automatically deducted when to start getting

  36. Role of Pension/Annuities • Base Income • Lump sum vs pension • Survivor benefits vs. single life • Longevity Insurance • Immediate annuity • When to buy • How to evaluate

  37. Role of Employer Plans • payout options • understand state law as they apply to the plan. • This is critical for non-married couples • Deferred compensation options • Determine the best way to access the assets. Note: Many clients forget small amounts left in jobs many years ago.

  38. Role of Inheritances don’t count on until received clients usually unaware of inheritance details beware of sharing with kids while living stewardship of family assets

  39. Role of Life Insurance • Need personal life insurance? • Ending will eliminate expense • Ending can free up cash value • Current coverage on retiree and family. • Are there special needs children or dependents involved?

  40. Role of Personal Use Assets • Houses may be largest asset outside of retirement funds. • Big expense • Physical effort • Psychic income and cost • Should mortgage be paid off? • Should house assets be backup for emergencies? Vacation homes?

  41. Role of Medicare increasing expense - basic often primary insurance at 65, even while currently employed means-tested costs supplemental coverage

  42. Role of Long Term Care Planning major risk during retirement what are likely costs?

  43. Develop Action Plan Demonstrate tradeoffs save more, work longer, spend less, die sooner Savings plan Investment plan Withdrawal strategies Financial risk to desired lifestyle Social Security & Medicare

  44. Shizma retirement Planning Process Goal Development Data Gathering Analysis Implementation Maintenance

  45. Cash Management • Setting up the paycheck • How is it paid? • Where is it paid from? • How do you adjust in future years? • How to handle big ticket items • What to do for overspending?

  46. Tax Management Tax diversification: Where to save Where to spend from Asset class placement Donating appreciated assets Roth IRA conversion

  47. Investment Management Asset allocation Evolving risk tolerance Rebalancing Supporting sustainable withdrawals

  48. IRA/Qualified Plan Management Required Minimum Distributions When not to rollover a qualified plan Keeping track of basis Keeping track of contribution ratios NUA

  49. Incapacity Management • Ask what happens if the asset control person has a stroke? Set up plans to enable another person to have knowledge/control. • Assure DPOAs are set up at the bank and HIPPA authority at doctor & hospitals • Work through the example of them having a common car accident. • Try a Disaster Drill

  50. Shizma retirement Planning Process Goal Development Data Gathering Analysis Implementation Maintenance

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