Critical steps to protect retirement assets

Although retirement and legacy planning may seem like two separate processes, they go hand in hand. Think of them as a hopeful beginning to a new stage of life after a long career. You not only want to prepare for any healthcare issues that pop up but also leave something to the next generation.

Roughly 10,000 baby boomers turn 65 every day. This puts additional strain on stretched government resources like Social Security and Medicare. And, with one-third of Americans uneducated about retirement and estate planning, a significant number of people won’t have adequate retirement savings or enough money to leave to surviving family members.

National retirement and legacy planning trends

Most Americans aren’t planning at all. They think they can rely on Social Security and retirement accounts, but they’re being shortsighted. Experts expect Social Security to run into a shortfall of funds by 2037. Meanwhile, 68 percent of all American employees have access to a company-sponsored 401(k) plan, but of that number, only 51 percent use it. 

Those with retirement accounts, like 401(k)s, may also not be looking into what their 401(k) is invested in and whether or not it’s being maximized. Individuals trust that it’s enough, or they may not be maximizing their contributions, keeping in mind how much they need.

Estate planning can help you combat these volatile trends and ensure your assets can be passed on to future generations. There are six critical steps to estate planning. They include wills, trusts, advanced care directives, powers of attorney, healthcare proxies, and insurance. Let’s look at these planning steps and how you can use them successfully.

Two plans: Estate and Financial

Create an estate plan

An estate plan protects you from the worst-case scenario of passing away without documenting how you want your assets distributed. People often avoid estate plans because it may mean thinking about uncomfortable subjects like sickness or death. But the consequences of avoiding estate planning are considerable.

Trusts can protect your assets from estate taxes and probate as well. Advanced care directives make your wishes known to healthcare professionals if you are incapacitated. Healthcare proxies and powers of attorney give trusted individuals decision-making power if you cannot.

The benefits of estate planning are both emotional and financial. You can save your family the emotional heartache of wondering what your wishes were by having them spelled out using healthcare directives and a durable power of attorney. You can ensure that much of your estate doesn’t go to the government by drawing up a will early and revisiting it regularly.

It is important to designate primary and secondary beneficiaries to your trust and estate plan. As stated before, keeping information updated guarantees your estate plan matches your family’s current situation. Additionally, a life insurance policy can serve as a safety net for any long-term illness or care costs that may arise. Including life insurance produces a robust estate plan that sets your family members up for success. 

Have a financial growth plan

Work with an investment professional to achieve an effective financial growth plan. That involves reviewing your current portfolio to see where your money can grow the fastest over time. Move your assets away from riskier investments. Think critically about your investments with your financial advisor to make underperforming assets work for you.

For example, do you have surplus funds in a savings account growing at 2 percent per year? Maybe that money would do better in an index fund that could get you 6 percent per year. While savings account interest rates are low and static, an index fund tracks the performance of market indexes, which generally outperform savings accounts over time.

Assets and investments: What to keep, what to reconsider

There are two categories of assets to consider when developing your investment and legacy planning strategy. Liquid assets can be cash you have on hand, money stored in a bank account, or any assets that can be quickly and easily converted to cash. Less liquid assets, like real estate, cannot be as quickly converted to cash in most cases.

Your financial plan should include strategies that protect your liquid assets and limit their exposure to risk, especially when you get to retirement. 

It is important to assess what insurances you may need, healthcare, long-term care, disability, and whatever risks are inherent with the plan right now. As you get older, you don’t have time to recover in certain investments like the stock market. Since you have less time, consider safer investments.

For instance, other assets meant to be held for a longer-term, like real estate, are less liquid but just as important to protect. Include your real estate holdings in a trust to protect them from probate.

Two types of trusts that I want to highlight are revocable and irrevocable. Assets in a revocable trust can be removed or amended at will and are not subject to probate, which can be lengthy and costly. This is especially useful if you own property in multiple states. A trust protects you from probate in all states in which property is owned.

Assets in an irrevocable trust cannot be removed or amended. You relinquish control of the asset once it’s placed in the trust. Because you give up control, the assets are not considered part of the estate and are therefore not subject to estate taxes.

Prioritize estate planning to secure you and your family’s future

Proper estate planning ensures individuals leave the legacy they want with family and friends. It also minimizes the suffering those left behind endure after the passing of a loved one. Estate planning requires some difficult conversations, but having those conversations makes for a far less complicated situation.

It is essential to educate yourself on retirement planning and to be proactive. Building an estate plan may seem like a lot of work, but many of the critical parts, such as wills, trusts, and powers of attorney, can be assembled with the help of an attorney and a financial professional very quickly.

Sabine Franco, Chief Esquire and Owner of The Ambitious Legacy Firm P.C., leads her team, ensuring that they help clients create businesses, protect properties, and plan legacies so they can be safe as they pursue their life purpose. With over a decade of experience, Sabine advises clients in asset protection and estate planning, so they are preparing and designing the best possible outcomes for their future endeavors. She provides her clients with trust and estate tools to achieve success with security. Sabine has worked in various fields such as business, matrimonial law, real estate, and estate planning. At The Ambitious Legacy Firm, she applies each field she has worked in to kickstart the next generation to help families plan for their futures through legacy and estate planning. Recognized as a “Super Lawyers” rising star for 2022, Sabine has been featured several times on “The Breakfast Club” (New York’s #1 radio show) and the “Earn Your Leisure” podcast, which is among the top five podcasts. She graduated from Hofstra University School of Law. When Sabine is not working with her clients, she provides legal guidance on her Podcast and YouTube show, “The Ambitious Legacy Podcast.” Recently, Sabine has published her first book titled, “You’re Richer Than You Think: A Step by Step Guide to building a lasting financial legacy for your family.” She also manages the legal affairs of a nonprofit organization, “Marie’s Food Pantry,” whose mission is to fight hunger in the poorest neighborhoods of Haiti by providing daily hot meals to the community. Sabine is a wife and mother and resides in Nassau County, NY. To learn more, please visit www.theambitiouslegacyfirm.com.