Create an Exit Strategy to Navigate a Smooth Transition to Retirement

Picture of Scott Hohman, CFP®, AIF®

Scott Hohman, CFP®, AIF®

Gain More Clarity, Confidence, and Comfort as You Move into this Next Phase of Life

The transition to retirement can be such an exciting time, full of the promise of new opportunities and greater flexibility. Finally, you’ll have time to travel, read, spend time with your family, pick up a new hobby, or do anything else you’ve been dreaming of doing. The key to having a relaxing and rewarding retirement is taking the necessary steps beforehand to give yourself the best chance of achieving your retirement goals. Part of doing this is creating an exit strategy that will help you smoothly navigate from working life to retired life.

Once you retire, your paycheck is gone so it’s crucial that you have a strong plan in place to support yourself – a plan that takes into consideration a plethora of things that could happen. Your health could take a turn for the worse, your house may need a repair you weren’t planning for, perhaps there’s an accident that leaves you seriously injured… None of us know what the future holds, so it’s important to plan for anything.

Below are three crucial things you should be considering as you plan out your exit strategy from the working world to ensure a smooth transition into retirement.

Consideration #1: Income in Retirement

In retirement, you’ll need to find new ways to support your lifestyle now that you’re no longer receiving a steady paycheck. Typically, retirees get their income from their investments and their Social Security benefits. However, you can’t simply retire and expect everything to work out without a careful plan in place. You’ll want to make sure that you adjust your portfolio accordingly to fit your retirement needs which could mean reducing the risk or putting a plan in place so that your portfolio generates income.

When it comes to Social Security, be sure that you think about the big picture when you’re deciding when to begin claiming your benefits. There are pros and cons to claiming your benefits early, just as there are pros and cons to claiming your benefits later in life. Many financial planning tools are available to help with this decision. It’s important that you take stock of your financial reality, your savings, your investments, and your retirement goals and pick the right Social Security strategy for you.


SEE ALSO: Common Financial Mistakes that Can Damage Your Retirement


Consideration #2: Tax Implications

It’s not uncommon for retirees to find themselves unprepared for the tax burdens they face in retirement. This is especially true if you’ve put a significant amount of your retirement savings into tax-deferred IRAs or 401(k) accounts where you have to begin paying taxes on your savings as you begin withdrawing money in retirement. Not to mention, you have to plan for tax rates to rise in the future so if you’re planning ahead, you’ll want to take rising taxes into consideration for the future.

It may be smart to look into converting your money into a Roth account in those early years of retirement, especially if you find yourself in a lower tax bracket. You’ll have to pay taxes when you’re converting your money, but then it will allow you to grow your money and withdraw your funds tax-free. The best way to ensure that you’re making smart decisions to keep your tax bill low is to talk to a professional financial advisor who understands tax law and is able to help you see the full picture. A professional can help you utilize the right accounts and income strategy depending on your current financial situation and your retirement goals.

Consideration #3: Healthcare and Long-Term Care

One of the biggest threats to financial security in retirement is healthcare costs. As we get older, the chances that we’ll find ourselves with more intense healthcare needs increase. The best way to ensure that your financial stability won’t be rocked should the unfortunate happen is to make a plan in advance for how you’ll cover healthcare and long-term care costs. Many retirees assume that Medicare will be enough, but Medicare coverage is complicated – even more so if you retire before you’re eligible for it – so it’s important that you do your research and learn how it works so that you’re well-informed.


SEE ALSO: 12 Ways to Find Fulfillment – and Avoid Boredom – in Retirement


Aside from Medicare, another option could be keeping your employer-sponsored health insurance, which some employers do offer for retirees. Additionally, under the Consolidated Omnibus Budget Reconciliation Act (COBRA), some retirees are able to continue using their employee health insurance even if the employer doesn’t offer insurance for retirees. Others may want to consider coverage made available through the Affordable Care Act (ACA), especially if income levels are low enough to qualify for tax credits. There are a few options, so make sure you look at all possible choices and make the one that’s best for your reality.

In addition to making a plan for general healthcare costs, you’ll want to think about how you’ll cover long-term care costs, should you need to. Long-term care poses a significant expense, especially for someone who is no longer working, so looking into options such as long-term care insurance is crucial to any strong retirement plan.

Concluding Thoughts

At the end of the day, your retirement will be as successful as you plan for it to be. If you take the time while you’re still working to map out the financial specifics of your life in retirement, you’ll be able to exit the working world with confidence that you’re well prepared and protected in retirement. What’s more, as you plan you may realize that you’re ahead of the curve and can retire earlier than you originally anticipated, giving you more time to enjoy the things you love.

At Resolute, we’re committed to helping our clients build a wealth management plan that empowers them and gives them ownership over their financial futures. If you’d like to talk with one of our advisors about your exit strategy as you move toward retirement, please contact us today.

The views expressed represent the opinion of Resolute Wealth Advisor, Inc. (RWA). The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While RWA believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the RWA’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.

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