Preparing for Retirement

By Estate Planning Practice Group

Hoping to retire in the near future? Here is an overview of seven things to consider.

Plan for Health Insurance

Affordable health insurance is one of the biggest obstacles to retiring prior to age 65. Group coverage is typically less expensive than purchasing individual coverage. Look for group coverage through professional associations, a spouse’s employer or even churches. Maintaining health insurance through part-time employment is also an option.

Though traditionally more expensive, purchasing an individual policy is also a coverage option. Individual coverage may become more attractive in 2014 when provisions of Obamacare go into effect. These provisions forbid insurers from denying coverage based on preexisting conditions, limit the degree to which insurers can differentiate based on age and simplify shopping through online exchanges.

At age 65, you will be eligible to enroll in the federal government’s health insurance program, known as Medicare. Evaluate whether to enroll in traditional Medicare or Medicare Advantage, which is a Medicare alternative designed to give Medicare beneficiaries access to a broad array of private health plans. In addition, consider purchasing a “Medigap” policy. Private insurers offer these supplemental policies to cover the coinsurance, deductibles and services not covered by Medicare.

Plan for Long Term Care

Long term care costs are a commonly overlooked matter in retirement planning. Health insurance policies do not cover the costs of caring for chronic disabilities, illness or infirmities (i.e. nursing home and assisted living expenses). This type of care is commonly referred to as “long term care.” Long term care can cost as much as $80,000 per year, and the odds of needing such care are high. According to the U.S. Census Bureau, individuals age 75 and older have a 53% chance of having some kind of disability.

Most individuals prepare for potential long term care costs using some combination of long term care insurance and self-insurance. Like most insurance products, the cost of long term care insurance will vary with your age, your health and the quality of policy purchased.

Transition Your Business

Transitioning your business takes planning. Plan on at least 3 to 5 years to implement an effective exit strategy. Begin by valuing your business and establishing a fair asking price. Involve your accountant and attorney in the process early on— they will help you minimize income tax, and protect your interests. Your buyer may be a fresh young entrepreneur, so be prepared to give mentorship as a part of the transition.

Update Your Estate Plan

Remember those old documents at the bottom of your safe deposit box? It’s time to dust them off and take them in to your estate planning attorney for an update. At a minimum, you should have a current power of attorney, an advance health care directive and a will. These documents will provide financial continuity in the event of your incapacity, express your wishes regarding medical and end- of-life decisions, and direct the division of your property after your death. You may also choose to create a living trust in order to circumvent the expense, delay and publicity of a court-supervised probate. A proper estate plan can also reduce the impact of state and federal death taxes, which currently affects individuals with property and life insurance totaling more than $1 million.

Meet With Your Financial Adviser and Accountant

Your financial adviser and accountant have tools to help you evaluate and plan for retirement. Learn which investments would be best to draw from first, and specifically ask for advice on when to begin drawing on Social Security benefits.

Most retirement decisions have hidden tax and financial impacts. Your accountant and financial advisor can help identify these impacts and use them to your benefit. For example, some items discussed in this article, such as health and long term care insurance premiums and estate planning costs, can be tax deductible.

Figure Out How to Coexist With Your Spouse 24/7

The emotional and financial strain of a divorce can pour a great deal of lead into the golden years. Many couples are surprised to find that retirement tests their relationship in new ways. Work with your spouse to develop and maintain mutual hobbies and interests. Balance your shared interests with individual interests, and respect the personal time and hobbies of your spouse. Remember, your spouse will now bear an additional 40 to 50 hours per week of your quirks and oddities, and vice versa. Work together to anticipate and solve potential problems through open and tactful communication.

Develop a Plan for Your Free Time

Get involved in a community or charitable program. Learn a musical instrument. Write that book you’ve been visualizing for the past 20 years. Spoil your grandkids. Join a book club. Become a Mentor. Write a personal memoir to pass on to your descendants. Create a long, ambitious bucket list and start checking it off. Cheat death for as long as you can—and when you die, die from exhaustion, not boredom.