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Easy Retirement: Important Legal and Financial Tips to Enjoy Your Golden Years

June 21, 2021

Are you in your 60’s, 50’s, or even 40’s and beginning to think about retiring? Here are five essential late-retirement-planning tips that address both your financial and personal well-being before and during retirement.

1. Maximize Your Contribution to Your Pension to Your Employer’s Match

If you contribute to a pension through your employer, be sure to contribute the amount your employer matches - no less and no more.

Why? If you do not contribute up to the amount your employer matches, you are leaving free money on the table. If you contribute more than your employer matches, you are missing an opportunity to diversify your retirement savings and investments.

2. Save the Maximum to a Roth IRA Each Year

If you can save for retirement above and beyond your contributions to the pension plan at work, open a Roth IRA and make every attempt to contribute the maximum each year.

Why? You contribute to a Roth IRA with after-tax earnings, meaning you pay income tax on the contribution at your current income tax rate prior to contributing, and you pay no income tax when you make withdrawals. There is no way to know what the income tax rates will be in 10, 20, or 30 years. Pay the tax now so that you know exactly how much money you have.

As of this writing in 2021, the current maximum annual contribution to a Roth IRA is $6,000 unless you are 50 years of age or older, in which case you can contribute $7,000 annually.

When you set up your Roth IRA, you will be able to select the portfolio of investments that most suits your risk tolerance. Generally speaking, the younger you are, the more risk you should take because the potential gain is more significant, and any losses can be made up for over time. The closer to retirement you are, the more conservative your investments should be in order to preserve the value of your account.

3. Enroll in Your Employer’s Group Life Insurance Plan, and Purchase the AD&D Rider if Available

Many employers offer group life insurance to employees as part of their benefits package at no cost or at a nominal cost. If you are offered group life insurance through work, take it.

Why? Its value is likely a multiple of your annual earnings, and you may be able to purchase more coverage if you apply for an individual policy. However, it will be much less expensive than a separate policy if indeed there is any cost to you at all.

If the group policy offers an optional Accidental Death & Dismemberment rider, purchase it.

Why? Suppose you get injured accidentally and cannot work, and workers’ compensation does not cover the injury. In that case, you will be covered by AD&D, usually up to the amount of the face value of the policy. This will help if you are not yet retirement age, cannot withdraw from your pension, and cannot collect Social Security payments. If you are killed in an accident, your beneficiaries will receive the AD&D benefit in addition to the death benefit.

4. If You Have Dependents, Purchase Term Life Insurance

If you have young children, a child with special needs, your spouse does not work or works only part-time, you have recently purchased a house, or you care for aging parents, it is important to purchase life insurance in an amount and for a term that covers your financial responsibilities to these people. Having life insurance coverage will ease your mind and free mental and emotional energy to focus on making the most of life, family, and work.

Here are some examples of how life insurance can help you.

Example #1: You are 36 years old, married, your spouse works part-time, and you have two children ages 6 and 8. You purchased a house 10 years ago, your mortgage balance is $250,000, and you have 20 years left on the mortgage.

You want enough insurance coverage to replace your income stream should you die, pay the mortgage balance, and pay for your children’s education. You believe that $1,000,000 would cover everything, but purchasing a million-dollar policy is not your best option as it does not take into account the changing needs of your family over time. You might “ladder” life insurance policies to save money in premium payments, purchasing the following policies:

Policy #1: 10 year term, $500,000 in coverage

Policy #2: 15 year term, $400,000 in coverage

Policy #3: 30 year term, $100,000 in coverage

For 10 years, all three policies are in effect. This is enough coverage to pay off the house, replace your income to support your family, and pay for college.

When policy #1 expires, you will have paid ten years more on your mortgage, and your children are 16 and 18. You are now covered by policies #2 and #3, which will pay the mortgage, replace your income stream, and pay for college.

When policy #2 expires, you have only five years left on the mortgage. Your children are 21 and 23 and presumably done or almost done with college. Policy #3 is intended to pay off the remaining balance of the mortgage and replace your income stream for your spouse for a time.

When policy #3 expires, your children are adults, your mortgage is paid, and you have recently retired or will retire soon. If your spouse is the beneficiary of your pension account(s) at that point, your financial obligations are all met.

Example #2: You and your spouse are in your early 50’s, each have good jobs and sizable pensions, do not have children, and are caring for your parents, ages 79 and 83, who live with you. You refinanced and have 20 years left on your mortgage, and the balance is $280,000. While income replacement is not a concern, you are concerned about what will happen to your parents and how your spouse will pay the mortgage if something happens to you. You might consider laddering life insurance policies this way:

Policy #1: 10 year term, $300,000 in coverage

Policy $2: 20 year term, $300,000 in coverage

When policy #1 expires, it is likely your parents will have passed on. However, if they live more than ten more years, you have policy #2 to help with expenses and to pay off the mortgage.

Stress and worry about finances and what will happen to your dependents if something happens to you compromises your health and affects your quality of life. Purchasing life insurance will create a feeling of security and vastly improve your state of mind, freeing you to live your best life, preserve your health, and enjoy your retirement fully when the time comes.

5. Make Your Last Will & Testament

If you do not take the time to make your last will & testament according to the laws in your state, your assets will pass to others according to your state’s laws of intestacy, which do not take your wishes into account.

Make decisions in advance about who gets what and who is responsible for executing your will (your executor). Update your will periodically as your family matures and/or your preferences or your family’s needs change. Like purchasing life insurance, making your will does not directly affect your retirement. Still, it does affect you in that you will feel organized, ready for anything, and prepared to enjoy retirement when the time comes.

For more tips and information regarding retirement plans, contact us.

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About the Author

Veronica Baxter is a writer, blogger, and legal assistant living and working in the great city of Philadelphia. She frequently works with and writes for Chad Boonswang Esq., a Texas life insurance attorney.

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