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Life Changes That Impact Retirement Planning

Retirement planning is not a one-time event, but a continuous process of making sure you are staying in line with the goals you set for yourself. Nothing changes your goals or available resources more than life events like marriage, divorce, and job change.

Here are some general tips on how life changes can be incorporated into your retirement planning process.

Marriage

You want to make sure before you get married that both partners understand each other’s retirement goals and strategies, so it’s important to discuss things like what you envision retirement looking like and how much each partner will contribute to retirement plans. Marriage can affect your retirement planning in more specific ways too. For example, 401(k) plans and other retirement accounts typically require that your spouse be named as the beneficiary or that you agree in writing to choose or name another beneficiary.

Children

As a general rule, you may not choose to use your retirement assets to provide for your children. There are two key reasons:

The money may be difficult to access before you reach retirement.
Leaving your retirement plan to a child may have significant tax consequences.

That’s why you should consider setting up separate investment accounts for your children’s needs, such as a Coverdell Education Savings Account, a qualified tuition program (529 Plan), a Uniform Gifts to Minors/Uniform Transfer to Minors account, or a Living Trust. See your Financial Advisor for more details.

Divorce

Divorce not only changes your financial baseline for retirement planning, it can affect your retirement plans themselves. Both IRAs and company-sponsored retirement plans are usually accounted for in any final divorce decree. Careful planning with your attorney, tax advisor and Financial Advisor is a must.

Changing Jobs

Gone are the days of working 30 years with one company. In today’s job market, we may work with many different companies before retirement. If you change jobs, consider rolling over the balance in your former company’s retirement plan to an Individual Retirement Account (IRA), or to your new employer’s plan. This keeps what you have accumulated working in a tax-advantaged way, so that you can keep your retirement plan going forward even as you stop to make a temporary job transition.

Early Retirement

Retiring early can either come by planning–adopting a timeline, strategy and professional assistance–or involuntarily–for job- or health-related reasons. In either case here are some things to consider:

Determine your net worth—add up the value of all your investments, real estate, insurance, and retirement assets, and then subtract your liabilities (such as debts and loans).
Review your plan—you may want to work with a Financial Advisor so that you can review income flow, insurance, estate planning, investments, possible government assistance, Medicare, etc.
Control spending—when retiring early, you’re going to face out-of-pocket expenses like recurring mortgage payments, daily living expenses, and potentially more expensive health insurance. Take some time to revise your existing budget to meet your needs.

Unexpected Events

Disability—life insurance may protect your loved ones if you die, but you may want to also consider a disability insurance policy in case you become physically or mentally incapacitated. Among other benefits, such policies can prevent your retirement assets from being depleted by the costs of long-term care or loss of earning power.
Nursing or assisted living needs of your parents—the exploding costs of long-term care can quickly deplete a family’s retirement savings. Long-term care insurance can help preserve what you’ve saved.
The death of your spouse—this can have a profound effect on your retirement savings if you haven’t prepared. Look at your health care arrangements to make sure both spouses remain covered in the event of one dying. In addition, many retirement plans and insurance policies provide for an annuity payment after retirement. You may wish to look into the possibility of a joint and survivor annuity so that the surviving spouse isn’t left out of the picture.

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07/04

Securities and Insurance Products: Not Insured by FDIC or any Federal Government Agency; May Lose Value; Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate Wachovia Securities is the trade name used by two separate, registered broker-dealers and non-bank affiliates of Wachovia Corporation providing certain retail securities brokerage services: Wachovia Securities, LLC, Member NYSE/SIPC, and Wachovia Securities Financial Network, LLC, Member FINRA /SIPC.

The information provided in this Web site is not intended to be nor should it be construed as tax or legal advice. As with any tax planning matter or strategy, please consult with your attorney and/or tax advisor.

Insurance products are available through insurance subsidiaries of Wachovia Corporation and underwritten by non-affiliated Insurance Companies. Not available in all states.

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