Ten Top Priorities When Planning for Retirement

Editor’s Note 5/4/23:  The rules governing when to take RMDs have changed since this blog was posted in July 2019.  For current information on RMDs, read our February 2023 blog post on RMD changes.

A 60-second read by the Baron Team:

1. Turning wealth into income – creating a total return strategy that produces a continuous paycheck just like you had when you were employed

2. Revising your investment strategy – which was successful for the accumulation phase but may not work as well now during the distribution phase

3. Protecting against new risks and concerns:

• longevity risk (outliving your wealth)
• loss of a job
• a long retirement horizon
• health changes
• covering cost of living
• keeping up with price inflation
• protecting against principal loss

4. Determining when and how to take your Social Security Benefits – the decision of when to take social security can be very personalized. There are various considerations and strategies that you should incorporate in your decision. This type of decision should be personalized to your specific situation and there is no patent right or wrong answer. These are some questions to consider:

• Will Social Security be there for me?
• How much can I expect to receive?
• When should I apply for Social Security?
• How can I maximize my benefits?
• Will Social Security be enough to live on in retirement?

5. Consolidating qualified funds such as 401(k) plans and IRA’s to optimize your benefits – the decision to roll-over or take your 401(k) must be carefully considered. IRAs are tax-favored savings and investment plans designed to accumulate assets for retirement.

• The IRA is not a particular investment; it is a registration which provides federal income tax benefits for retirement investments (such as money markets, mutual funds, stocks, etc.) within the account.
• Understanding when to use a traditional IRA, a Roth IRA or a Stretch IRA can have ramifications to your own retirement and also to your family.
• IRAs provide flexibility since you have virtually unlimited investment choices.

6. Taking Required Minimum Distributions (RMDs)

• You must begin taking required minimum distributions by April 1st of the year following the year in which you reach age 70 ½.
• If you withdraw less than the required amount, you will incur a penalty tax of 50% of the difference between the amount you withdraw and the amount of your required distribution.

7. Funding long-term care and medical care costs

• Evaluate what is right for you
• Understand the pros and cons of Long-Term Care Insurance and other Health Care Plans, such as Medicare and HSA Policies

8. Selling a primary residence or buying a retirement home  - determine financing options

9. Selling a business

• What is the exit plan?
• Improve your valuation
• Provide for a smooth transition

10. Passing wealth on to children and grandchildren  - evaluate simple or more sophisticated techniques

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Disclosure:  This material is not intended to be relied upon as a forecast, research, tax or investment advice.  Please consult your financial planning and tax professional for personal advice.