7 Ways To Protect Your Assets and Income in Retirement

Planning for retirement is vital to ensuring you have enough money saved to live comfortably during your golden years. To ensure your future financial security, you must consider different ways to secure your assets and income in retirement and take measures to protect your retirement corpus from external factors such as market volatility, inflation, etc. Reach out to a professional financial advisor who can help you come up with a strategy to protect your assets and grow your savings to help secure a comfortable retirement. Read below to understand how you can safeguard your retirement assets and income.

What are the different ways by which you can protect your assets and income in retirement?

1. Set aside funds for healthcare expenses

As per Fidelity Retiree Health Care Cost Estimate, an average 65-year-old retired couple would need $300,000 in post-tax savings to meet their healthcare costs in 2021. This figure does not include long-term care costs that you may incur. Due to rising life expectancies and medical care costs, it is imperative that retirees focus on long-term care and save enough funds to meet their healthcare expenses. Long-term care costs form a critical part of retirement planning and must be prioritized when discussing retirement planning with family and your financial advisor. Hence, it is important to maintain a separate fund for long-term care expenses to ensure you do not dip into your retirement savings.

2. Ensure you take tax liabilities into account

Taxes can be complicated and difficult to navigate especially if you are unfamiliar with them and do not possess the requisite knowledge to manage them. Hence, it is advised to hire an expert who can help sort out your tax affairs and minimize the effect of taxes on your retirement savings and assets. The professional can help you understand the tax implications on your inheritance, estate, capital gains, etc., and prevent them from eating into your retirement funds. He can also create a tax strategy that takes into account all present and future taxes that your retirement savings and assets may be subjected to. So, if you wish to negate or minimize the impact of taxes on your retirement corpus, it is advisable to consult with a financial advisor who can offer appropriate guidance.

3. Take the necessary steps to counter inflation

Inflation leads to an increase in the prices of goods and services that leads to a decline in the purchasing power of money. With a rise in inflation, your future purchasing power is negatively affected. For retirees, even a moderate inflation rate can spell trouble. For instance, if you have invested heavily in debt instruments, there may be a good chance that inflation may negatively impact your portfolio returns.

As an investor, you must calculate the effects of inflation and annual COLA (cost-of-living adjustments) on your investment portfolio. Also, factor in Social Security, and certain pensions, annuities, and investments like commodities, Treasury Inflation-Protected Securities (TIPS), growth-oriented stocks or ETFs, real estate securities, and more, to counteract inflation. This will help protect your returns as well as your retirement assets.

4. Make long-term-care insurance a part of your retirement plan

Long-term care (LTC) insurance typically covers nursing-home care and in-home care for people 65 or older or those who are suffering from a chronic condition that requires constant supervision. It is private insurance that offers more flexibility and options compared to Medicaid and can be purchased by anyone who can afford to pay for it. If you do not want LTC costs to make a dent in your retirement savings later down the line, it is advised that you buy LTC insurance to avoid the same.

5. Assess your ideal retirement age and plan towards it

Put a number on what age you wish to retire and work toward building a substantial retirement corpus that will see you through your retirement years comfortably. The longer you wait to start your retirement planning, the lower your retirement corpus will be. Moreover, if you have a few decades to go before you decide to hang up your boots, you may have higher risk tolerance. This would allow you to invest in high-risk assets such as equities, real estate investment trusts (REITs), commodities, high-yield bonds, currencies, and more. Doing so will help you generate sufficient funds to boost your retirement savings. That said, as you advance in age, your risk appetite may decrease and your focus may shift towards asset protection and capital preservation. Thus, it is important to be sure about the age that you wish to retire and put in your best efforts to amass a substantial retirement corpus by the time you reach the said age. If you need help assessing how to have enough saved before your retirement, consider speaking with a financial advisor who can provide effective strategies to grow and manage your savings.

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6. Estimate your average retirement expenses

Make an estimate of how much you will be spending in retirement. This estimate would help you determine the size of corpus and savings needed for you to live comfortably during your golden years. A lot of retirees assume that their annual expenses will be considerably lower post-retirement, however, this assumption can be flawed. Though it is advised to clear all debt before reaching retirement, it is safe to say that some retirees may still be paying their mortgage or making debt repayments. Further, they may incur unexpected medical costs, buy a home, or may wish to pay for their children's/grandchildren’s college tuition. To meet these expenses, an average retiree may require more funds than they may have anticipated at the time of coming up with a retirement plan. Thus, you should take the aforesaid expenses into consideration at the time of devising your overall retirement strategy.

7. Avoid making unplanned withdrawals

Using up your retirement funds too quickly can spell disaster and may leave you with insufficient money for the later years of your retirement. As your retirement nears, it may be best to plan your withdrawals so you do not fall astray of retirement plan withdrawal rules and attract penalties for the same. Be it a 401(k), traditional, or Roth IRA, each retirement plan has different rules and is subjected to different withdrawal rates and taxes. To avoid taxes eating away your retirement funds, you need to take certain steps to lower your taxability and your withdrawals in accordance with the prevalent rules. For example, you can make tax-free withdrawals if you own a Roth IRA account provided you are 59.5 years of age and have owned the account for at least five years at the time of making a withdrawal.

To summarize

Typically, you should look to work on a retirement plan that allows you to generate inflation-beating returns and helps you protect your retirement assets and maintain your portfolio's value. Identify different ways through which you can best grow your portfolio and protect your retirement income and assets. Take timely steps to negate market volatility and make the most of opportunities that present themselves.

If you have any concerns or doubts, reach out to a financial advisor who can guide you effectively on how to best safeguard your retirement assets and income and ensure you live comfortably during your retirement years.  Use the free advisor match service to connect with 1-3 financial advisors based on your financial requirements. All you need to do is answer a few simple questions about yourself and the match tool will help connect you with advisors that match your financial needs.