Planning for retirement is a big step. Asking yourself or your financial advisor the right questions early on can make all the difference in achieving your financial goals down the road.
To build a solid plan that allows you to achieve your ideal retirement lifestyle without stress or sacrifice, you need to consider multiple aspects of your life.
This is why we’ve put together an overview of some of the most important financial planning questions to ask when planning for retirement, broken down into the following six categories:
- Budgeting and Cash Flow
- Investment and Tax Planning
- Estate Planning
- Health Insurance
- Pensions
- Social Security
If you have a spouse or a partner, these are also important questions to address with them to ensure you’re on the same page when it comes to your retirement planning.
Budgeting and Cash Flow
One of the biggest concerns for retirees is ensuring they don’t run out of money. Understanding your expected income and expenses is the first step to being able to effectively plan for your desired lifestyle.
Discussing these questions with your local financial advisor in Tampa or reflecting on them on your own can help you create a sustainable plan for your cash flow:
1. How much money do you need to cover your basic expenses and lifestyle in retirement?
Start by calculating your fixed expenses (housing, utilities, food, insurance) and discretionary expenses (travel, entertainment, hobbies). A detailed retirement budget helps you determine if your savings and income sources will allow you to sustain your lifestyle.
2. What sources of income will you have, and how reliable are they?
Consider pensions, Social Security, annuities, investment income, and part-time work. Some income sources, like Social Security and pensions, are relatively stable, while others, like investments, will fluctuate in value.
3. Have you factored in inflation and unexpected costs?
Inflation erodes purchasing power over time, and unexpected expenses—such as medical emergencies or home repairs—can disrupt your budget. It’s smart to have an emergency fund and review your budget regularly.
Cash flow and budgeting are at the core of your retirement plan. By carefully analyzing your expenses, income sources, and potential financial risks, you can develop a strategy that keeps your finances secure throughout retirement.
Investment and Tax Planning
Investing wisely and selecting the right retirement accounts can make or break your ability to achieve your retirement goals. Asking the right questions about investments and tax planning can help you optimize your portfolio for both growth and tax efficiency.
4. Are your investments aligned with your retirement goals and risk tolerance?
Your portfolio should be diversified and structured based on your retirement timeline and risk tolerance. The more time you have to invest, the more aggressive you can likely afford to be so you can grow your assets faster, if that is in line with your risk temperament.
5. Is your portfolio positioned to reduce risk?
As markets fluctuate and unexpected events happen, having a diversified portfolio consisting of multiple asset classes can help cushion your retirement funds from significant losses. If you haven’t reviewed your portfolio recently, it’s worth considering whether it’s positioned to reduce risk—especially as you near retirement.
6. Which accounts should you be using for your retirement savings —401(k), IRA, Roth IRA, or taxable brokerage?
Each account has different tax advantages and withdrawal rules. A mix of tax-deferred and tax-free accounts can create more flexibility in retirement.
7. How can you minimize taxes on investment withdrawals in retirement?
Strategies such as withdrawing from taxable accounts first, followed by tax-deferred and Roth accounts, can reduce your overall tax burden. Consult with a tax professional for the best strategy for you based on your tax situation.
A strong investment strategy tailored to your retirement goals ensures that your money continues to grow while minimizing tax consequences to help you make the most of your hard-earned money.
Estate Planning
Proper estate planning ensures your assets are distributed according to your wishes and minimizes potential legal headaches for your heirs. If you haven't yet done your estate planning, now is the time - even if you’re still decades from your planned retirement date.
8. Do you have a will or a trust, and is it up to date?
A will is a fundamental estate planning document that specifies who will inherit your assets. Without one, state laws determine how your estate is distributed…and that might not always align with your wishes.
9. Have you designated beneficiaries on your accounts and insurance policies?
Retirement accounts, life insurance policies, and bank accounts often allow you to name beneficiaries directly. Keeping these designations updated prevents delays and complications if there are changes in your life.
10. Do you have a plan in place to minimize estate taxes and avoid probate?
Strategies like gifting assets, using trusts, and converting traditional IRAs to Roth IRAs can reduce estate taxes. A properly structured estate plan can also help your heirs avoid the lengthy and costly probate process.
Estate planning helps ensure your financial legacy is protected and that your loved ones aren’t burdened with unnecessary legal or tax issues.
Health Insurance
Healthcare is one of the largest expenses retirees face. This is why it’s so important to consider it ahead of time. Many people include health coverage in their list of questions to ask when retiring.
11. How will you cover healthcare costs in retirement?
While Medicare is available at age 65, it often doesn’t cover everything that you might need in terms of healthcare. Out-of-pocket costs for prescriptions, dental, vision, and hearing services can add up fast.
12. Are you eligible for Medicare, and do you understand your options?
Medicare has multiple parts—Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (prescription drug coverage). Understanding your choices ensures you get the right coverage at the best cost.
13. Should you consider long-term care insurance?
Nursing home and in-home care costs can be substantial. Long-term care insurance can help protect your assets and provide financial security if you need extended care.
Ensuring you have the right health coverage in place can help prevent unwanted surprises later in retirement.
Pensions
Among the key questions to ask a financial advisor about retirement is how to cover your retirement income needs. And if you’re lucky enough to have a pension, figuring out how to best take that pension should be the first place to start.
14. Do you have a pension, and how will it be paid out?
Pensions may offer different payout options, such as lump-sum payments or lifetime annuities. Understanding the pros and cons of each option helps you make an informed choice.
15. Should you take a lump sum or monthly payments?
Taking a lump sum gives you control over your money and may allow you to invest it elsewhere, but this means you’ll need a solid plan for how to manage these funds. And while taking fixed monthly payments may provide a steady income stream, it often doesn’t take into account the risk of inflation.
Consider your pension payout options carefully to align with your retirement goals.
Social Security
Social Security benefits can be a vital part of your retirement income and knowing when to claim them can make a big difference in your overall financial plan.
16. When should you start claiming Social Security to maximize your benefits?
You can begin receiving benefits as early as age 62, but waiting until full retirement age (66-67 depending on your year of birth) or even delaying until age 70 increases your monthly payment amount.
17. How will your claiming strategy affect your spouse’s benefits?
If you’re married, your claiming decision impacts spousal and survivor benefits. Coordinating your benefits can help maximize your household’s total income.
18. Will Social Security alone be enough to support your lifestyle?
For most retirees, Social Security only replaces a portion of pre-retirement income. Having additional savings and investment income is critical.
Planning your Social Security claim strategy ahead of time can increase your lifetime income and provide greater financial security.
Get Support on Your Retirement Planning Journey
When planning for retirement, asking the right questions can open the doors that help you take advantage of opportunities that you may not have known existed - whether it comes to your investment options, tax planning, or estate planning strategies.
If you’re ready to create or update your personal financial plan, reach out to our financial advisors in Tampa and get the guidance you need to plan for a retirement of your dreams.
