Make Time for a Retirement Checkup

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.

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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.”