Strategies for a carefree retirement

Retirement is perhaps one of the biggest concerns for many working Americans. A large percentage of savers today are unsure if their current portfolios will be enough to cover all expenses after they stop working. However, there are several strategies that can help you reduce the likelihood that your nest egg will run out before you do. The path to a secure retirement can begin with the following simple steps.

Manage debts

If you've accumulated a lot of high-interest debt from credit cards or consumer loans, pay it off first. This is smart retirement planning because you get a guaranteed return on the debt you pay down. For example, if you pay off a credit card that charged you 20% interest, you essentially earned a 20% return because you were guaranteed to have paid as long as a balance was due.

However, most planners will tell you that it is not advisable to liquidate your current retirement assets to pay down debt. "By using retirement funds to pay off credit cards, you are essentially solving one current financial problem but postponing another in the future. Think of it as taking money out of one pocket and putting it into another; you're basically no better off than before. A better approach is to adjust your spending habits to pay off credit card debt, " says Mark Hebner, founder and president of Index Fund Advisors, Inc. in Irvine, California, and author of" Index Funds: The 12-Step Recovery Program for Active Investors. "

So let your retirement accounts continue to grow while you shift your current income toward eliminating your liabilities. (For more information, see: Expert tips for saving on credit card debt .)

Other strategies include consolidating your student loans with a company like Social Finance and paying off your home before you stop working. This last idea is perhaps one of the most powerful ways to eliminate worry from your retirement plans because your home is a tangible asset that you can still live in and use even if your market value drops to zero. Your retirement dollars will also stretch considerably further if you don't have to worry about a house payment every month.

"If you're in your 50s and considering refinancing, explore the possibility of a shorter term," suggests Marguerita Cheng, CFP®, CEO of Blue Ocean Global Wealth in Rockville, Maryland. "One of my clients refinanced from a 30-year to a 15-year mortgage. She turns 60 this year and can pay off her mortgage. "

Accelerate Benefits

The need for long-term care in America has grown exponentially in recent years, and the costs associated with this type of care have also continued to skyrocket. Statistics show that the average 60-year-old man now has at least a 50% chance of needing some type of long-term care before he dies, and the odds are even higher for women. But these costs can be financially devastating for those who don't have real insurance coverage in some form to pay for it. Unfortunately, the cost of long-term care insurance itself has also risen so high that many middle-class Americans can no longer afford it either.

The answer to this dilemma can be found by purchasing permanent life insurance that includes accelerated benefit entitlements that can be used. To pay for critical or chronic medical expenses. In most cases, chronic illness benefits are triggered when the insured is physically unable to perform at least two of six activities of daily living (ADL) for more than 90 days. The policy then pays out a fixed monthly benefit until the insured either dies or is able to function normally again or the dollar limit in the policy is reached. When the insured dies, the remaining coverage amount in the policy is paid out as a death benefit.

The percentage of face size that can be used for accelerated services such as critical or chronic conditions varies from one provider to another. These riders are available in both temporary and permanent policies, but think carefully before you buy a policy to secure accelerated benefit protection. If this policy lapses or becomes non-renewable in later years, you will be left without protection at the time you are most likely to need it.

Analyze retirement options

If you're fortunate enough to be familiar with a guaranteed annuity payout during retirement If you're married, you may have a choice regarding the form of payout you receive. You can choose to receive a higher monthly payment for life without a survivor annuity or a lower payment with a remainder benefit to your spouse. The right answer to this decision can involve many factors, including your and your spouse's current health and projected longevity, financial situation and life goals. 

Have a plan

Seeking professional help is one of the most obvious steps you can take to ensure you are on the right path to retirement planning. With a written financial plan, you can see much more clearly what you need to do and whether what you are doing now is right. A financial advisor can help you create and maintain an investment portfolio that meets your goals and risk tolerance.(For more information, see: What is your risk tolerance? )

Today's financial planning programs can also help you see the impact of different options on tax and estate planning, z. A single life payout for your retirement and life insurance as an alternative to a survivor annuity.

Creating an effective estate plan is also important so you don't have to worry about what will happen to your assets when your time comes. "A well-thought-out estate plan will allow you to provide for the people who matter most to you after you die," says Kirk Chisholm, wealth manager at Innovative Advisory Group in Lexington, Mass.

Wills, trusts and powers attorney may all be necessary to ensure that your affairs are handled smoothly and quickly if the need arises. A simple guide that lists all of your assets, as well as their locations, passwords, account numbers and the contact information of all related parties such as brokers, attorneys, bankers and insurance agents will also greatly simplify and expedite the estate planning process for your executor.

The last line

Retirement planning can be very stressful for those who don't prepare adequately. But those who start early and plan ahead can avoid many potential obstacles on their path to a secure retirement. Following the strategies listed here will go a long way toward a worry-free retirement. For more information about retirement planning and what you need to do to make sure your future is secure, consult your financial advisor or find one on the Financial Planning Association website.