Pre-Retirement Tips

November 3, 2021

Getting close to retirement is exciting but making the right financial decisions before retiring is crucial. Here are some things to think about:

Create a Social Security strategy. One of the biggest decisions to make is when to start taking Social Security. Every individual is different and there are several factors to take into consideration. Do you still plan on working? Do you have longevity in your family? Do you need the monthly income to cover expenses? Married couples need to consider the age of each spouse, longevity, and work histories to determine when to take Social Security. We have a Social Security Optimizer that we can run for your individual situation.

Paying off your mortgage is not always the smartest idea. If you recently took out a mortgage or refinanced your mortgage, your interest rate might be lower than what you would earn if you invested the money. For example, if your portfolio is earning an average of 7%, and your mortgage interest rate is 3%, it would be better to keep your money invested as you will pay less to service the debt than you would earn on your investments. In addition, you will have the mortgage interest tax deduction and leveraging your money just like banks do.

Have a qualified financial advisor look at your portfolio before making any big moves with your investments. People in pre-retirement tend to get too conservative too soon. Once you retire you could still live another 20 to 30 years. Shifting a large amount into lower-yielding investments to safeguard too soon can cause inflation risk. You need a suitable amount in growth assets to protect the purchasing power of your portfolio against inflation.

Invest in Long-Term Care Insurance. Paying out of pocket for long-term care can drain your savings. An annual average for nursing home costs is about $80,000. Assisted living and in-home care are nearly as expensive. The best age to apply for long-term care insurance is 53 or 54 years of age. That is the age where you will get the highest benefit for premiums paid.

These are just some suggestions, and we always help clients throughout their financial lives. For a complimentary personalized financial plan contact us.

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