Newsletter

Do You Know Your Exit Strategy from the Working World?

Planning Ahead Can Ease Your Financial and Emotional Transition into Retirement
Kathy Longo, CFP®, CAP®, CDFA Wednesday, 23 February 2022

Do You Know Your Exit Strategy from the Working World?

The transition into retirement can be an exciting time in many ways. After all, you’re finally going to have more free time to spend as you wish, whether that’s traveling, volunteering, taking up a new hobby, or simply spending more time with loved ones. Of course, this transition can also cause financial stress and emotional overwhelm if you aren’t properly prepared. That’s why it makes sense to plan out your exit strategy from the working world before the time comes.

Why You Need to Prepare

Not only does having a comprehensive retirement plan help with financial security, but going through the steps to create your retirement plan could end up leading to new discoveries. You may uncover problems you hadn’t originally seen or have the realization that you can retire earlier than you originally expected.

Below we’ll discuss a few fundamentals of retirement planning that you should keep in mind as you develop your exit strategy.

Risk Management

When you’re working, you’re afforded the opportunity to be a bit bolder in your investments and take on a greater amount of risk. This is because you have a steady income that you’re able to rely on to support yourself. However, once you retire you will be depending on those investments to provide steady income. You’ll want to be sure that, as you get closer to retirement, you’re rebalancing your portfolio accordingly and mitigating unnecessary risk. This means moving any risky investments into more stable investments that can provide the long-term, reliable income you’ll need.


SEE ALSO: Portfolio with a Purpose: The Benefits of ESG Investing


Social Security Benefits

If you’re like many retirees, Social Security may be a significant part of your retirement income. When it comes to the timing of when you’ll claim your benefits, be sure to take time to fully consider the various options available to you and how they will fit into your big-picture retirement plan.

For instance, claiming benefits at 62 may mean that you’re getting money earlier, but it also comes with a reduced monthly check. Another option is to claim your benefits when you hit your full retirement age – which is 66 to 67 for most –to increase your benefit amount. Lastly, you could hold off until 70 to claim your benefits and get an even bigger check– but the added income could push you into a higher tax bracket. The point is, deciding the right time to begin claiming your benefits is an important part of your retirement planning journey, so make sure you’re giving yourself the time and resources to make the right choice for yourself. 

Healthcare and Long-Term Care

As we age, it’s normal for our health to begin to deteriorate and demand more complex and expensive healthcare. Couple that with rising healthcare costs and the financial burden of potential long-term care, and these expenses can pose a serious threat to your bank account if you’re not prepared. Whether you’re going to be depending on Medicare, a Health Savings Account (HSA), personal insurance, or something else, it’s crucial that you have a plan in place that works to protect your finances no matter what health concerns may arise in retirement.

Tax Strategy

As far as retirement savings accounts go, tax-deferred options such as a 401(k) tend to be popular among workers who are diligently saving for retirement. While these accounts are great for your tax bill in the present, tax-deferred savings could come back and bite you as you begin to withdraw your money in retirement – especially if tax rates increase. Because of this, you may want to consider diversifying your savings into a few different types of tax-advantaged retirement savings accounts to spread out your tax burden.

One way to do this could be moving some of your money from your 401(k) to a Roth. You may have to pay taxes on the money that you move, but then your funds will be able to grow tax-free and you won’t be taxed when you begin withdrawing money from the account.


SEE ALSO: Recipe for Success: 10 Ingredients for Financial Well-Being


Building Your Ideal Retirement

After spending decades of your life working, saving, and investing in your future, you deserve to have a restful and fulfilling retirement. Without a well-planned exit strategy and retirement plan, though, it’s going to be much harder to achieve that dream retirement. As you begin to think about what you want this next stage of your life to look like, consider the factors above and how you may want to plan them out so your transition into retired life is as seamless as possible.

It can be overwhelming and complicated to piece together all of the elements of a retirement plan on your own. Having a professional in your corner who you can trust is the best way to ensure you’re seeing the big pure, know all your options, and help alleviate some of the transitional stress that can come with a big life change.

At Flourish Wealth Management, we are committed to helping you create a financial plan that’s about more than just money – one that accurately reflects what you value most. If you’d like to speak with one of our professionals about your retirement plans, schedule your discovery call today.

About the Author

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.

 

  • This email address is being protected from spambots. You need JavaScript enabled to view it.

Contact Us

  • 3300 Edinborough Way
    Suite 420
    Edina, MN 55435
  • FAX: 952.953.3310
Listen to Flourish Financially on Your Favorite Streaming Service


Copyright © 2020 Flourish Wealth Management, Inc. All Rights Reserved. Powered by AdvisorFlex.