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Financial Tools for Post-Retirement

The main difference between the 60+ age group and the pre-retirement set is the degree to which certain tools are owned.

Interestingly, these tools are nearly the same as those in 40-60 age group. The main difference between the 60+ age group and the pre-retirement set is the degree to which certain tools are owned. In your retirement years, when you no longer have a paycheck and are totally dependent on your retirement income sources, you'll want to consider reducing how much investment risk you're taking. During this time you will want to decrease your ownership of stocks and other growth-specific assets and increase ownership of fixed-income assets (annuities, bonds, CD's, cash). If your real estate portfolio is strongly cash flowing you may not want to reduce it unless tax advantages or market opportunities prevail. Probably most people should keep some percentage of their retirement income-producing assets in growth-type tools because your income requirement will go up every year at least by inflation. Also, tax increase and Social Security benefit decreases can increase your income need. Additionally, your annual income need will sky rocket if you or a dependent suffers a serious illness or injury and needs long-term care of some kind.

At retirement or in the 10 years preceding retirement look at purchasing a long-term care policy. In the insurance section what this policy does is discussed in detail. The reason it's mentioned here is because when a long-term care situation occurs it's a financial crisis for most. These levels of recuperative care or non-recovery maintenance care can cost $18-$30,000/year. Any retirement nest egg will erode quickly after a few years, especially with a healthy spouse's on-going living needs.

Cash value life insurance was discussed as a means to accumulate a retirement income source because under current tax laws you can tap that pot on a tax-free basis, including the growth on the premiums paid in. But, in addition to being an income source or a way to take the maximum pension payment, you may find that its the most affordable way for you to leave a benefit to your survivors or favorite non-profit.

Charitable Remainder Trusts could be a great way for people who have built a highly profitable business with a small investment, or who own agricultural, residential or commercial real estate or stocks with low cost basis to be able to sell those assets without any income or capital gain tax and turn the profits into an income you cannot outlive. For this to work you must be at a point in your life where you are willing to gift the high value asset to a valid charity, for which you get a charitable donation tax deduction. Then the charity sells the asset and their professional money managers invest it and pay you an agreed upon income. Upon the death of the final income beneficiary the charity gets the principal to further its community service work.

Yes, you occasionally hear about a widow or a couple who has more money than they can spend. Why is that? Most likely because they created a retirement investment plan, selected the best investment tools for their goals and stuck to their strategy, adjusting it only when necessary.


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Patti Walter
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Fort Collins, CO 80534

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