Investor Psychology

Make Time for a Retirement Checkup

Retirees are inclined to invest more conservatively, so chances are you don’t have as much money in stocks as you should.

One thing I’ve learned two-plus years into my retirement is that handling legal and fin­ancial affairs can be a full-time job. Dealing with Medicare, filing for Social Security, monitoring your investments, minimizing taxes, figuring out required minimum distributions, updating your estate plan and end-of-life wishes... yikes!

Fortunately, Kiplinger’s is around to help. But I was also intrigued recently when I received an invitation to the Smart Money Retirement Expo, presented by the investment management firm of Edelman Financial Engines, the Funding Our Future Coalition and radio station WMAL in Washington, D.C. It sounded like a good opportunity to make sure I’m checking the right boxes and see what needs attention. So I attended several sessions of particular interest to people already in retirement and came away with a number of useful reminders.

For example, in the session on generating retirement income, one observation came as a jolt. Even if you have, say, $1 million in savings, you’ll probably have much less than that after paying taxes on withdrawals. Part of your Social Security income may also be taxable.

To account for the effect of taxes and inflation, Edelman advisers think you need a return of about 5%, yet the income you can generate from traditional income investments is at or near historic lows. The answer: a globally diversified portfolio. “Your first inclination in retirement is to become more con­servative, so chances are you don’t have as much money in stocks as you should,” said company founder Ric Edelman. “That could be 30% to 40% rather than 10%.”

Future shocks. If I had to pick one key word from the discussion on estate planning, it would be beneficiaries. No matter what you say in your will, the proceeds from assets such as insurance policies and retirement accounts always go to the beneficiaries you’ve designated. So make sure you’ve named the people you want to name. If you have, say, named your adult children as primary beneficiaries of your life insurance, do you want your grandchildren to inherit the money if one of your children should predecease you?

Review your entire estate plan if it has been five years or more since you looked at the documents. Make sure your heirs have the passwords to digital assets, such as your photos or your library of e-books (see Make Sure Your Spouse Has Your Passwords). It’s also a good idea to review your medical directive every few years to account for medical advances.

When it comes to long-term-care insurance, even if you’re over 50, it may make sense to self-insure and save the money you would have paid in premiums. If you do decide to buy coverage, consider a hybrid policy that would provide a death benefit to your heirs if you don’t use the money. And couples can purchase a pool of benefits that can be used by either spouse.

Already have a policy on which the premiums have been rising? It might be possible to reduce the cost by changing one of the features—buying less inflation protection or shortening the coverage period, for example. And you may be able to use money in your health savings account to pay long-term-care premiums. Whatever you decide, talk about it with your family members and go over the terms of the policy if you have one (see Avoid the Obstacles of Long-Term-Care Claims).

I appreciated the advice Edelman gave the men in his audience when questioned about choosing a financial adviser: “Keep your spouse in mind,” he said. Statistically, wives are likely to survive their husbands, so “make sure this is a family affair.”

Most Popular

2 Credit Card Gotchas to Watch Out For
credit cards

2 Credit Card Gotchas to Watch Out For

After an infuriating wake-up call with her own credit card company, one financial services consultant wants consumers to know something: It’s smart to…
October 20, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
October 15, 2020
When Retirees Question More Retirement Income
annuities

When Retirees Question More Retirement Income

What would you say if I told you that you could safely get significantly more retirement income from your retirement savings? That’s what I call an In…
October 20, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
The Best Vanguard Funds for 401(k) Retirement Savers
mutual funds

The Best Vanguard Funds for 401(k) Retirement Savers

Vanguard funds account for a third of the 100 most popular 401(k) retirement products. We rank Vanguard's best actively managed funds, including its t…
October 21, 2020
Stock Market Holidays in 2020
Markets

Stock Market Holidays in 2020

Is the stock market open today? Take a look at which days the NYSE, Nasdaq and bond markets take off in 2020.
October 12, 2020
Is the Stock Market Open on Columbus Day 2020?
Markets

Is the Stock Market Open on Columbus Day 2020?

Columbus Day (increasingly known as Indigenous Peoples' Day) is a federal holiday, but not for much of Wall Street. Here are the stock market and bond…
October 10, 2020