The Importance of Retirement Planning
End-of-life planning is important for all of us. We all need to approach our later years with a strategy that ensures we are financially comfortable and that our assets are distributed according to our wishes. The two main components of end-of-life planning are estate planning and retirement planning, and each is equally important. However, according to the United States Department of Labor, only about half of Americans have calculated how much they should save for retirement. If you have questions about the importance of retirement planning or estate planning, you can learn more by contacting the experienced Minnesota and Florida estate planning lawyers of the Roulet Law Firm at (888) 719-5589.
What Is Retirement Planning?
Retirement planning is a multi-faceted process for maintaining sufficient finances in your post-work life. It begins with setting goals and then developing a realistic plan for meeting those goals. Early working-life retirement planning is mainly about saving enough money for retirement. In the middle of a career, it often expands to set specific income or asset goals and steps for meeting those goals. During retirement, the assets accumulated during your working life go into the distribution phase and you begin receiving payouts.
Some of the key components of retirement planning include:
- Identifying all post-work income sources
- Estimating expenses
- Developing a savings strategy
- Managing assets and risks
- Estimating future cash flows
Why Is Retirement Planning Important?
Retirement planning is all about preparing for life after a career. While the financial aspects of retirement planning are vital to living a comfortable post-work life, this planning should encompass all aspects of life after work. However, a strong financial retirement plan is usually necessary to achieve non-financial retirement goals. For example, retirees who want to spend significant time traveling the world will need to have their finances in order.
According to the Consumer Financial Protection Bureau, retirement plans should balance debt, retirement income, and assets. Retirement planning from the beginning of your career can help ensure that you have enough money to fund your lifestyle after leaving the working world. Without a strong retirement plan, retirees are at risk of outliving their resources, which can be disastrous. When this happens, retirees may need to return to work or sell off major assets like the family home.
When Should You Start Retirement Planning?
It is generally best to start retirement planning as soon as possible after entering the workforce, but it can be done at any stage in life. As the old saying goes, the best time to start is yesterday, and the second-best time to start is today. Starting early will make it easier to meet your retirement goals, but those who have put off retirement planning should not let this discourage them from getting started. You can learn more about the importance of retirement planning and how to get started by contacting the Minnesota and Florida estate planning lawyers at the Roulet Law Firm.
The longer a worker saves money for retirement, the longer that money has to grow. For example, say a 25-year-old worker starts putting $3,000 per year into an individual retirement arrangement (IRA) with a 7% annual return for ten years and then stops saving. That initial $30,000 investment will grow to over $338,000 by the time that worker turns 65. Conversely, a worker who starts contributing to an IRA at age 35, with the same $3,000 contributions and 7% annual return, will only see their $90,000 investment grow to $303,000 by age 65.
What Is Estate Planning?
There is a common misconception that only the wealthy have estates, but anyone who owns property does. An estate consists of everything a person owns, such as their car, the family home, other real estate properties, bank accounts investments, life insurance policies, furniture, and personal possessions.
Regardless of the size of an estate, the owner should have a comprehensive estate plan that outlines how the assets of the estate should be distributed. In addition, an estate plan should include detailed instructions for medical care and financial affairs should the owner of the estate become incapacitated. For individuals with minor children, the estate plan should include a guardian who will provide for those children should both parents pass away. Estate plans can also be used to minimize taxes, court costs, and legal fees through measures like living trusts. Estate planning is an ongoing process and estate plans should regularly be updated throughout the owner’s lifetime.
How Are Retirement Planning and Estate Planning Related?
Retirement planning and estate planning are both about planning for the future. An estate includes all of the assets a person owns, and an estate plan provides specific guidelines for how these assets should be distributed to heirs and beneficiaries. While a retirement plan is focused on accumulating and managing a person’s assets in their post-work life, an estate plan focuses on how to pass these assets on after the owner dies or becomes incapacitated.
A retirement plan and an estate plan should work together to achieve financial goals. An estate plan can offer protection for retirement assets, such as 401k or investment accounts. By including these assets in an estate plan, the owner can ensure that they are distributed to beneficiaries without difficulties in the probate process. Estate plans also typically include a financial power of attorney, which designates a representative who will be responsible for handling your finances according to your wishes should you become incapacitated. This designated individual can ensure that your retirement planning goals continue to be followed.
Learn More From Our Estate Planning Lawyers
Planning for your financial future may seem intimidating, but a well-structured retirement plan can ensure you have the money you need to enjoy a comfortable lifestyle after leaving the working world. In addition, working people of all ages should have a comprehensive estate plan in place so that their affairs can easily be settled should they pass away or become incapacitated. At the Roulet Law Firm, our Minnesota and Florida estate planning lawyers help our clients meet their retirement and estate planning goals through careful planning. If you have questions about the importance of retirement planning or any estate planning matter, you can learn more by contacting our Minnetonka, MN office at (763) 420-5087 or our Venice, FL office at (941) 909-4644.
And, if you would like to learn how to make it as easy and inexpensive as possible for your family to manage your affairs during incapacity and after passing, while ensuring your assets only go to whom you want and how you want, click here to register for our FREE online masterclass.
And, if you would like to learn how to protect your home and life savings from long-term care and nursing home costs, click here to download our FREE guide Save our Home: How to Protect Your Home and Life Savings From Long-Term Care and Nursing Home Costs.