Your commitment to retirement savings will put you in a far more comfortable position when it comes time to retire. You should also, however, look at ways of protecting what you’ve already saved and earned, through insurance and legacy planning strategies.
Insurance
Among the biggest risks to your saving plan is the chance you may not be able to fund it. A well-crafted insurance program can help you preserve your assets for yourself and your heirs.
Life Insurance—the “traditional” approach to life insurance emphasizes a death benefit to your heirs, to ensure they would be protected no matter what the state of your investments. Certain provisions of some life insurance policies (loans, transferability) may also be used as part of a larger investment strategy.
Annuities—an increasingly popular retirement income alternative, annuities may help you provide for your heirs, while helping you accumulate long-term funds on a tax-deferred basis. Your earnings aren’t subject to current income taxes unless you take withdrawals, so your money compounds faster than it would in a similar, taxable investment.
Long-Term Disability—your chance of becoming disabled due to illness or injury is a significant risk during your work years. Having a plan in place in the event that you are unable to return to work may make your financial life easier in the long run.
Long-Term Care—have you made preparations in case you (or your loved ones) require long-term medical care or nursing home expenses? Among other benefits, such policies can protect your retirement funds from being depleted by paying for long-term expenses.
Health Insurance—with the trend of employers to no longer offer health insurance to retirees, you may need to look into a supplemental health insurance policy to go along with Medicare after you retire. It might be wise to factor this additional cost into your retirement planning process.
Other Insurance—protecting your home, auto, and other personal property are standard risk management approaches, but you may also wish to examine excess liability insurance to protect your business, your investments, or your earning power.
Legacy Planning
Sound retirement planning also incorporates what happens to your assets after death. Getting your estate in order can make a lasting impact on the people and charities that mean the most to you. Here’s an estate planning checklist:
Assess your worth. Start with your overall financial picture—your net worth. You need to identify not only your financial and investment assets, but also the value of your real and personal property. Identify anything that may need to be taken care of in case you’re incapacitated. Check on taxes that will need to be paid by your estate.
Put it in writing. With the assistance of an attorney, you can outline how you wish your estate—your assets and liabilities—to pass through after your death. This can either be done in the traditional form of a will, or through a trust, which may help avoid probate, ensure privacy, and maintain control while you are alive. Remember to keep your estate papers updated if you move, remarry, divorce, or experience any change in your life.
Distinguish between types of estate property. Certain property, like retirement plans and life insurance proceeds, is not covered in a will or personal trust, but transferred by contract upon your death. Be sure to keep beneficiary designations with this type of property up-to-date.
Discuss your wishes with your family and beneficiaries. By letting others know what your plans are today, you can prevent misunderstandings after your passing.
Choose your executor. Who do you trust to carry out your wishes after your passing? Whether it’s a family member or friend, the executor needs to be someone who can handle the decisions and paperwork surrounding your passing and the probate of your estate. Be sure to name a back up and discuss your plans with him or her. You don’t want to surprise someone with the responsibility of settling your estate.
Keep children in mind. If you are raising minor children, make sure that you name a guardian who will care for them into adulthood. Establish how you want your children to inherit your estate, whether it’s through investments or through trusts. Clearly, choosing the guardian of your children is a very important decision. Be sure that whomever you name is aware and willing to take on the responsibility.
Consider a living will. A living will declares that you do not wish to be kept alive by extreme medical means if you become mentally or physically incapacitated and have no realistic hope of recovering to lead a normal life.
Explore trusts. Many special needs, such as protecting real estate, ensuring privacy, or setting conditions on your money while you are alive, can be addressed by setting up a trust. Trusts are also a good way to potentially lessen the taxes on your estate. Types of trusts include:
Living—a living trust controls your estate assets during your life and can minimize tax cost.
Testamentary—a testamentary trust provides a range of trust services to manage assets for your beneficiaries.
Revocable—these living trusts can protect your assets from the cost of probate and allow for private and seamless estate settlement. They may also provide for the appointment of someone to manage your affairs should you become disabled.
Irrevocable—this is a living trust that cannot be altered or terminated by the person who set up the trust during his or her lifetime.
Charitable—a charitable trust allocates a portion of your assets to an organization of your choice, thereby reducing income, estate, and gift taxes.
Keep an original copy. Keep the originals of your estate documents in a secure place, such as a home or business fireproof safe or bank safe deposit box. If that can't be arranged, keep it in your lawyer's office or with the clerk at your local probate court, who will hold it for safekeeping in a sealed envelope. Wherever you decide to keep your will, make sure that its location is known by family members or close friends.
Review your plan. Your family circumstances or financial fortunes may change, as may federal and state laws. Review your estate planning every five years with your lawyer (and revise if necessary) to ensure that your will and/or trust reflect your current status and desires.
Protecting your assets from theft
The computer age makes backing up your vital papers easier, but it has opened the door to a new level of risks, such as identity theft. It’s important to be cautious with your planning documentation. Do not share your information over the Internet unless you are dealing with a trusted, secure source. Do store your paper documents in a safe, fire- and water-proof place. Also, be sure to shred out-of-date documents that may conflict with your current ones.
For more information on these products and services, contact your Financial Advisor.
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.