Ahhh! Retirement! No more alarm clocks. No more rush hour traffic. No more salary either! Everyone had certain expectations and dreams about retirement. Did your plan meet your ultimate objectives? Today, planning after retirement is as much a necessity as planning before retirement. Proper planning and follow-through can help you avoid shortfalls in your income needs and assure you a smooth, secure transition from the world of work to the world of retirement.

Keeping Pace with Change
Planning during retirement years means setting new goals and deciding how they will be met, within the framework of a changing financial picture. Many retirees find themselves torn between a satisfying lifestyle and one lacking many comforts that make life easier. Without a solid financial foundation, you may face some hard choices over your retirement years. A successful financial plan, executed faithfully, will help make many of those choices easier. If you have already retired, or if retirement is approaching, consider these factors to best position yourself for an enjoyable retirement:

Strategies Change
During the accumulation phase of your retirement funds, you could afford to be more aggressive with the types of investments you made. If they declined slightly in value, it didn’t affect you greatly because you had time to recover any losses, and you were still accumulating principal. After retirement, or probably just before retirement, you should gradually shift your assets to more conservative, income-producing vehicles.

An Aging America
Unlike our ancestors, who had only a few years of life expectancy once they retired, it’s not uncommon these days for Americans to spend one-third of their lifetime in retirement. We are living longer and healthier; consequently, lifestyle options have changed. Your retirement assets must last longer and be able to accommodate cost-of-living increases. If you don’t make your money work for you as hard as you worked for it, you may need to return to the workforce to help supplement your retirement income.

Lifestyles of the Rich and Famous?
We all hope that in retirement we will be able to enjoy the same lifestyle we had during our working years. The likelihood, however, is that we may have to adjust living arrangements and buying habits. Remember, it’s not uncommon to spend 25 to 30 years in retirement. Thus, it’s important to ensure your retirement assets will be sufficient over a long period of time. Reviewing your retirement savings versus your objectives with a financial advisor on a regular basis can be a good first step in ensuring you stay on the right path.

Death and Taxes (You really can change one of these!)
Many people wonder how federal estate taxes will affect them. The federal estate tax is a transfer tax on the value of assets in your net taxable estate at the time of your death. Federal estate taxes will generally be due if the sum of your net taxable estate and taxable gifts exceed $1,000,000 (in 2003). The first step in understanding the federal estate tax is to understand what comprises your estate. Treasury regulations relating to the taxation of property owned at death contain a catch-all definition that the “gross estate of a decedent who was a citizen or resident of the United States at the time of his death includes the value of all property, whether real or personal, tangible, or intangible, and wherever situated, beneficially owned by the decedent at the time of his death.” Among those often overlooked items that are includable in your estate are your rights to future income, such as your right to payments under a deferred compensation agreement or partnership income continuation plan. These rights are commonly referred to as “income in respect of a decedent” and are included at their present commuted value. Likewise, your interests in any business you own at your death, whether as a proprietor, a partner, or a shareholder in a corporation, are includable in your gross estate. In addition, your personal property, investments, real estate, retirement plans, and proceeds of life insurance policies that you own are also included. (The value of Social Security survivor benefits, either lump sum or monthly annuity, are not included in your gross estate. This is one significant benefit of the Social Security system.)

The actual task of determining what is includable in your gross estate can require some in-depth analysis. Your estate should be re-evaluated each year so your beneficiaries and heirs will not face agonizing decisions over your wishes and federal estate tax requirements. In addition, the use of certain estate planning documents, coupled with any necessary adjustments to property ownership, has the potential to minimize estate taxes and maximize any estate tax credits. However, it is important to consult with qualified legal, tax, and insurance professionals to ensure your planning decisions are consistent with your overall goals and objectives.

In summary, monitoring the distribution of your savings after retirement is as important as the accumulation of savings during your working years. Let’s not forget that just because we reach retirement doesn’t mean that planning for the future ends!

Mr. Gary Crooms is President and founder of Senior Information Services of America®, a long term care financial planning firm that specializes in assisting seniors and their families with late life planning issues. If you have any questions, please contact Mr. Crooms at gary@seniorinformation.com