Before It's Too Late ~ Eric Gullotta

Eric Gullotta Eric S. Gullotta, JD, CPA, MS (Tax) specialies in estate planning and taxation law. His office is located at 232 West Napa Street, Suite A, in Sonoma. Contact him at 938.7234 or visit Gullottalaw.com.

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Planning for retirement

Posted on September 14, 2017 by Eric Gullotta

Quiz time – how much time did you spend planning your most recent vacation? How much time, in total, have you spent planning vacations? Now, how much time have you spent planning your retirement? See where I’m going?

Yes, planning a vacation is more fun than planning for retirement, but which is more important? The real reason many, if not most, people don’t make that plan is fear. They are literally afraid of what they’ll find when they actually start planning. They fear that they’ll have to work longer or maybe not even be able to retire at all.

This is faulty thinking. Regardless of whether or not you plan… your retirement age is coming. The only way to successfully get there is to make a plan, work the plan and then enjoy the fruits of your hard work.

If you start planning for retirement early and get bad news, you may not be so bad off. If you start planning early, many deficiencies can be cured or at least mitigated. Young people have the most leeway as they have decades to plan and start saving/investing.

The earlier you start, the more money you’ll have in retirement. More money is a good thing right? Let’s look at some numbers. As a 40-year-old male, I may decide to target 75 as retirement age. Remember, 75 is young in today’s world. This means I have 35 years to save. If no one has ever taught you about the power of compounding interest, here is your intro lesson; if I save just $100 per month for the next 35 years and assume a 7 percent rate of return, I’ll have $180,105 towards retirement.

Now, what if I started planning later, say 55, just 10 years later. What is my penalty? The same $100 per month now only gets me $52,093 – which is a $128,012 penalty! There are plenty of these scenarios, contact your financial advisor to learn more.

Health care is on everyone’s mind these days. The undecided fate of the Affordable Care Act, skyrocketing health care costs and a population living longer makes providing for your health care in retirement a major concern and a major cost, including the dreaded prospects of needing long-term care.

Did you know you might be able to shift some of that risk to an insurance company via a long-term care insurance plan? Many people are familiar with the month-to-month payment plans just like any other insurance – but have you heard of the fixed deposit plans? This is where you deposit a one-time sum of money with an insurance company and that amount “buys” you either long-term care (the amount is based on the amount of the deposit) or a death benefit payable to your beneficiaries. If you don’t use the long-term care benefits your family still receives a lump sum at your death.

Uh, aren’t you an attorney, why are you talking about financial planning and long-term care? They are all related. A poorly-executed estate plan can drastically and negatively affect your retirement plan. When retirement calculations are done, they don’t include unexpected attorney’s fees, court costs or other nasty little fees that can creep up without a plan. So, yes, a well-drafted estate plan is still part of a healthy and well thought out retirement plan.

Coordinating your life insurance with your estate planning documents can help your family keep more of what you planned for. Having an estate plan can give your family access to all this money you’ve saved and invested – can you imagine going through all this work only to have this money kept away from your loved ones while they fight with the court over access? Don’t get me started on how income and/or estate taxes can decimate a plan when not accounted for properly.

Bottom line, start planning now. Talk to an attorney, talk to an accountant and to a financial advisor. Don’t make the same mistakes your neighbors are making – address your retirement head on and give yourself time to build the retirement that’s best for you, before it’s too late!

 



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