Retirement Questions for Your Adviser


Even a die-hard do-it-yourselfer can get jitters when retirement approaches. That might be time for a second opinion from a financial adviser.

Typically, the “pre-retiree” boils it down to one question: Do I have enough? A simple yes or no is not very useful. So LIMRA, a trade organization for 850 financial-services companies around the world, suggests a starting point of five key retirement questions to ask your financial adviser.

When should I retire? Sadly, it’s not just a question of when you want to retire and where, but when you will actually be able to. It goes beyond the size of your nest egg to cover issues like how you will get health care coverage, pay off debts and plan for contingencies like illness or losing your job before you’re really ready to retire. Retirement is not a spur-of-the-moment decision. The date ought to be set five years a head of time, so you can come in for a smooth landing, LIMRA says.

How do I plan to handle income and expenses? Some expenses will change immediately when you retire, such as commuting costs, lunches out and even clothing. Others may change gradually, like out-of-pocket medical expenses. Your income from wages may drop to nothing overnight, while other income may gradually shrink due to inflation. A pro can help figure whether your income will still be large enough 10, 20 or 30 years after you retire.

Which funds should I draw from first? Like many retirees, you may have a mixture of taxable investments, tax-deferred holdings like 401(k)s and traditional IRAs, and tax-free holdings like Roth IRAs and municipal bonds. Figuring which funds to tap first and which to leave for later generally depends on tax issues, but can be even more complicated if you hope to leave assets to heirs.

What required minimum distributions will I have to take? Certain investments, like 401(k)s and traditional IRAS, require that you begin withdrawals after turning 70 ½. Generally, you have to pay income tax on those withdrawals, though you’re obviously not required to spend the rest.

What risks should I plan for when I retire? For most people, unfortunately, retirement is not as carefree as they’d like. The risk of illness grows as you age. There is a risk that inflation will eat away at your assets faster than you’d expected. Market volatility can undermine the value of stocks, bonds and real estate. And, of course, there is “longevity risk,” or the possibility you will outlive your money. A pro can help you figure how serious each risk is and how best to counter it.

If you look over the five key questions, you’ll notice that the more money you have, the less serious they are. That’s why experts worry that too many people leave retirement planning for too late.

Ideally, saving for retirement begins in one’s 20's. Many people who have never set up a formal retirement plan continue to procrastinate for fear of what they’ll find out. But delay can only make things worse. If you’re in your 50's or older, you really should get some answers to those five key questions.

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