Nearing Retirement

Now that you're nearing retirement, hopefully you've accumulated enough assets to get you through your retirement years. Regardless of where you are financially, you may want to prepare for those Golden Years.

If you haven't built your nest egg for retirement, now is the time start thinking about how you may need to subsidize your retirement income. Relying on Social Security alone may only provide you with a small portion of what you might need to live on. In order to have sufficient income for retirement, you may need to look at other options, such as increasing your savings, postponing retirement to a later date or working part-time during retirement. If you're not currently saving enough for retirement, you may want to consider saving more money and, if you qualify, open an IRA or other retirement account.

Seek guidance from a qualified tax professional when considering your options for your retirement savings. Tax benefits and consequences may vary depending on your individual circumstances. Here's what to consider when planning for your retirement.

Sources of income
The primary sources of income retirees might receive during retirement are:

• Social Security
• Employer-sponsored retirement plans, such as 401(k) and pension plans
• Income from personal savings
• Investment income, including IRAs
• Wages from part-time employment

Estimate the amount of income yo might expect to receive from each source—and for how many years.


A budget
Set up a budget for your living expenses. How will you spend your retirement years? Will you travel? Move to another state? Take up a hobby? No matter how you decide to spend those years, you may want to create a budget.


Establish an emergency fund
If you haven't done so, consider an emergency savings account for potential unforeseen crises.


Examine your investment portfolio
A good practice is to consistently meet with your investment professional to review the overall asset allocation strategy. Is it still the right strategy?

An investment professional will work with you to help you allocate your portfolio based on your objectives and risk tolerance. You should consider your age, the assets you've accumulated, time horizon (years until retirement), risk tolerance and other important factors when creating your portfolio strategy. Although asset allocation and diversification can help mitigate the effects of market fluctuation, it can't ensure a profit or guarantee against a loss.

Contact an investment professional to help you with investment planning.


Consider your 401(k) retirement account options
If you have a 401(k) or similar qualified account, here are some options upon retirement:

• Take a distribution (cash out). Cashing out your 401(k) will give you access to the funds you've accumulated; however, this option may pose some drawbacks. When you cash out your 401(k), you're subject to a mandatory 20% federal withholding. You have a 60-day window in which you can do a tax-free rollover into an IRA or another 401(k) plan. To roll over the funds, you must "make up" the 20% withholding. (Taking a distribution is reportable to the IRS.)
  
  
• Request a rollover into an IRA. A rollover is a tax-free transfer of money from one qualified plan to another. With a direct or trustee-to-trustee rollover, you can request a direct transfer of the money from your 401(k) account into a rollover IRA, giving you the potential for continued tax-deferred growth. In addition, you won't be subject to a 20% federal withholding, although this distribution is still reportable to the IRS.
  
  
• Leave your 401(k) where it is. Many companies will allow you to leave your 401(k) account in their 401(k) plan if you meet a certain minimum dollar requirement.

Plan ahead for long-term care
Have you thought about the level of medical attention you might need in the event you require long-term care in the future? A long-term care insurance policy can provide you with benefits that a standard health insurance policy may not offer, such as coverage for home care, adult day care, hospice, assisted living and nursing home. Having a long-term care insurance policy can help to cover costs associated with long-term care.


Evalulate your life insurance needs
Do you currently have a life insurance policy? If not, do you have family members, such as a spouse, children or grandchildren who could benefit from the proceeds of a life insurance policy? Life insurance can provide your family with financial protection in the event of your untimely death and cover funeral costs, medical bills and estate taxes.


Develop an estate plan
If you haven't already done so, you may want to think about establishing an estate plan. A well-constructed estate plan may be essential in protecting your heirs from the burden of legal bills and taxes, as well as the complicated process involved in settling an estate. Seek the advice of an estate attorney regarding your particular situation.


Ask for help
Our investment professionals can help you understand the challenges you may face during your retirement years and work one-on-one with you to help you make savings and investment decisions about your retirement.

To schedule a free consultation, find an investment professional at a WaMu financial center near you.