Top Ten Things to Do Before Retiring

Retiring soon?  Here are some tips from Ric Edelman's "Top Ten Things to Do Before Retiring" from Inside Personal Finance:

Here’s what to do now if retirement is on your horizon.

1. Decide how you are going to spend your time. What are you going to do during the first 6 to 12 months in retirement, and what do you plan to do for the rest of your retired life?

2. Determine (realistically) how much money you will spend monthly. Remember to include periodic expenditures such as gifts, vacations, taxes, an occasional new car, and emergencies.

3. Anticipate the cost of health care. You’ll have no employer to pay this for you; Medicare, MediGap, and private insurance are all up to you.

4. Buy long-term care insurance. Now.

5. Refinance your mortgage. Many people are shocked to discover that they either cannot borrow money after they retire, or they are forced to pay higher rates.

6. Boost your cash reserves. Make sure your rainy day fund is enough to cover at least six months’ worth of expenses.

7. Evaluate your sources of income. You have already figured out what you’ll spend on a monthly basis. Now figure out where that money will come from.

8. Revise your investment strategy. The way you’ve handled your investments over the past 30 years is not how you should handle them for the next 30. While preparing for retirement, you were focused on asset accumulation. When you’re in retirement, you need to focus on income and on keeping pace with the increasing cost of living. Assets must be flexible and liquid so you can meet needs you did not anticipate. New words will enter your vocabulary: rollovers and lump sums.

9. Review your estate plan. Review your will and trust. Don’t have them? Get them. These documents can protect you and your assets while you are alive and benefit your spouse and children when you pass on.

10. Perhaps the most important thing of all. If you are not excited about retirement, then don’t. Many people quickly become bored after retiring. It’s OK -- even exciting -- to return to school or the workplace. Many do this, often in completely new fields.

12 steps to take in your 60s

Liz Weston's recent MSN Money article, "Money in your 60s: 12 steps to take," explores 12 steps you can take to proactively prepare for retirement during your final years of work.  These steps include:
1)  Zero in on a retirement date.
2)  Figure out where you're going to live.
3)  Consider long-term-care insurance.
4)  Don't forget to include medical costs.
5)  Deal with your debt.
6)  Draw up a retirement budget.
7)  Review your Social Security and pension options.
8)  Check your withdrawal rate.
9)  Consider an immediate annuity.
10) Stress-test your plan.

Click here to read the full article.

When to buy long-term care insurance

When should you start thinking about purchasing a long-term care coverage policy?

In the video below, Dan Danford, Founder and Chief Executive Officer of Family Investment Center, gives an outlines the four things everyone should consider when deciding to purchase long-term care coverage.

LTC Benefits? Beware this Hybrid Product (Agents are Selling the Heck Out of It!)

I’ve met with three different people in the past month who were contemplating or, in one case, had already purchased a unique new “product” offered by insurance companies. The product is actually a combination of two products; an annuity and an insurance policy. They pair these two together and then “include” a Long Term Care (LTC) benefit from the combination.

The LTC benefit is what customers think they are buying. It is certainly what agents are selling.

But the LTC is really just an acceleration of the death benefit that they’ll have to pay (upon death) anyway. So, they sell the future value of the annuity plus the death benefit, and then show that you can withdraw from this future amount in monthly LTC benefits. But, of course, those benefits are deducted from the eventual death benefit. They are giving your own money, and claiming it’s an LTC benefit!

If you separate the two, the annuity amount will likely grow better and quicker as an investment account or IRA and a term life policy will be much cheaper than whole life insurance. But insurance illustrations never show the opportunity cost of 1) lower annuity returns, and 2) the inferior investment component of the life insurance policy. The agent doubles up his commissions (whole life policy and annuity) and the insurance company makes ongoing fees from both parts (and possibly adds a fee for the accelerated death benefit). And then it pays a quasi-LTC benefit from your own money! It’s a ridiculous product, but they are selling the heck out of them today.

My recommendation? Beware this sales gimmick. If you genuinely need LTC insurance, buy that product directly from a reputable source. If you need life insurance, buy a term life policy to cover your beneficiaries. Annuities? Find a better place to invest your money.

Paying for long-term care

Editor's note: We recently fielded an inquiry from a member of the media who wanted to know how couples can pay for long-term care. Dan Danford had a terrific response that addresses this very common question, and I thought it would be helpful to share it with everyone here. Of course, if you have more questions, let us know in the comments section.

We do quite a bit with retired clients, and this is a common query. My initial response is that the fear is greater than the threat. Most people worry about these costs, but that's because we focus on the horror stories we hear. In truth, the average stay in a nursing home is less than six months, and I've rarely encountered clients who exhausted all their resources. In fairness, though, our clients are more prosperous than most Americans, but experience tells me that they are the group that worries the most about it, too.

Long Term Care insurance can be purchased with many options and most will cover some home care. But policies differ a lot from company to company and the terms are very important. There are elimination periods and daily rate caps, and even lifetime benefit caps. Some promise a return of premium, if unused, and others toss in some life insurance. This is a very complex product and I recommend great care in buying one. For comparison's sake, I suggest buyers visit the AARP website for explanations and price quotes. You might choose to buy through a local agent, but an quote through AARP is a nice baseline for comparing. Policies cost a lot more as you age, so many advisors recommend purchasing in the 50s.

I am licensed in Missouri for health and life insurance although I've never sold a single policy! I keep my license current so I can evaluate existing policies for clients and the continuing education keeps me current on products and trends.