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6 Min. Read

What’s Included in a Comprehensive Retirement Plan?

Published
Couple speaking with a financial advisor about retirement

A comprehensive retirement plan has elements which will help you make imprtant decisions about your retirement including, how early you can retire, and how you can expect to live in retirement. It includes putting saving strategies in place early on that allow you to live comfortably after leaving the workforce. Good planning accounts for multiple facets of who you are that will impact what you need to consider including your age and gender, your income and lifestyle. It takes into account different scenarios in the future, as well as considering your wishes and, of course, your financial reality. As well as a savings strategy, a comprehensive retirement plan includes spending strategies and asset protection.

The following lays out elements of savings and asset protection included in a comprehensive retirement plan.  

Retirement Savings Strategies 

When planning a saving strategy, you should consider the age you want to retire, lifespan expectations, lifestyle considerations (where you want to live and how), and how you’ll pay taxes. An online calculator or app can be a good place to start projecting how much you need to live comfortably during retirement. However, enlisting the aid of a financial advisor can help you make sure you’re covering all your bases and making informed decisions about withdrawal strategies and minimizing tax liability.

A solid savings strategy involves multiple savings vehicles. Here is a rundown of the types included in most comprehensive retirement plans and a brief explanation of how each contributes to your plan.

Retirement Savings Accounts 

Accounts with tax advantages, including a Roth or traditional IRA or a 401(k) from your employer, can help you save for retirement more efficiently.  

A Roth IRA allows you to contribute after-tax dollars and withdraw later without worrying about taxes. On the other hand, traditional IRA and 401(k) retirement accounts allow for tax-deductible contributions today but require you to pay taxes when you withdraw funds later. If you work for an employer that offers a 401(k) match it’s always wise to contribute at least the amount required to get the match.

Consider a strategy that allows you to save with a combination of tax-deferred and tax-free withdrawals later, based on whether you expect your taxes to increase or decrease over time. You can also consider a Roth conversion if you have traditional funds and think you can improve your tax situation by paying Uncle Sam sooner rather than later. 

Investment Accounts 

Tax-advantaged retirement accounts come with restrictions on when you can withdraw your money. Supplementing your retirement savings with taxable investment accounts can offer you some flexibility in when you choose to retire. Use index funds to capture stock market performance for long-term retirement wealth building. 

When using investment accounts, though, be aware of the tax consequences. You need to understand long-term vs. short-term capital gains and how to manage your tax liability. Consider strategies like tax loss harvesting from your taxable accounts when the stock market is down while allowing your tax-advantaged retirement savings to grow. Managing your assets well during a downturn can make a difference later in your overall nest egg. 

Real Estate 

Don’t forget the place of real estate in your retirement and financial planning strategy. If you have an investment property you rent to others, those payments can offer a source of income in retirement. 

Even if you only have real estate in the form of a primary residence, you can still benefit. If your home is paid off or you have a substantial amount of equity, a reverse mortgage can offer additional cash flow, or security.

Income from real estate is also useful for supplementing income during down markets when you might not want to sell stocks. 

Social Security 

Social Security benefits also count toward your larger retirement picture. While you can begin receiving Social Security benefits at age 62, you might be better off waiting. The longer you can put off taking Social Security, the larger your monthly payment will be. By putting off Social Security, you might be able to draw down traditional accounts to reduce your required minimum distributions (RMDs) when you reach age 72. 

In some cases, though, taking Social Security earlier can make sense. Working with a financial advisor can help you determine your best course of action.  

Annuities 

Some retirees find that allocating a portion of their assets to an annuity that covers their basic expenses can make sense. Depending on your situation, the right annuity can provide peace of mind by offering a guaranteed monthly payment for life. There are several types of annuities available. While offering stability, they are not solutions for everyone. A financial advisor can help you weigh the pros and cons and select an annuity that makes sense for you.

Protection for the Future  

When used in conjunction with the right retirement savings and withdrawal strategy, asset protection can keep your nest egg secure. The following covers areas outside of savings that need to be included in any comprehensive retirement plan.

Healthcare coverage 

Your medical expenses might amount to hundreds of thousands of dollars during retirement. Here are some of the main ways you can reduce healthcare’s impact on the assets in your nest egg

  • Medicare and other medical insurance. Once you’re eligible, sign up for Medicare. This can reduce how much you pay out of pocket for various medical expenses. If you’re too young for Medicare, consider other insurance options, including your state’s Affordable Care Act exchange.  
  • Long-term care insurance. Plan ahead for the possibility that you might need to use assisted living or some other long-term care facility. Medicare doesn’t pay for many long-term care arrangements, so getting the right coverage can be a big help. The younger you are when you get a long-term care policy, the more you’ll be able to cover later (and the lower your coverage will be). 
  • Health Savings Account (HSA). If you qualify for an HSA, you can make tax-deductible contributions and grow your wealth over time. Later, you can withdraw money tax-free for medical expenses. It’s possible to invest your HSA money to grow tax-free for qualified expenses. Consider using an HSA to cover health care costs and then using other accounts for daily expenses. 

Asset Protection Plan 

Your asset protection plan should include various insurance policies, including health, disability, homeowners, and car coverage. All these insurances provide you with the ability to cover large expenses without drawing down your nest egg.  

An asset protection plan should also include an emergency fund that allows you to handle the unexpected without going into debt or taking from your retirement savings accounts. 

Finally, life insurance protects your loved ones if you pass. Make sure you and your partner have good policies that protect each other during retirement.  

Estate Planning 

An essential part of protection for the future involves estate planning. Some documents to consider in your estate plan include: 

  • Last Will and Testament 
  • Healthcare directive 
  • Power of attorney 

You can also set up a trust designed to pass on your assets with a minimum of fuss. If you have a small business, your estate plan should include succession planning.  

A financial professional can help you figure out how to manage your asset protection with your saving strategy for a comprehensive retirement plan that works for you.