Why You Should Revisit Your Estate Plan Near Retirement Age

Retirement marks a new chapter in your life.

It’s a time to celebrate, slow down, and maybe fulfill lifelong dreams. But as life changes, so do your plans for yourself and your loved ones. Major life events, health considerations, and shifts in tax laws can all influence the effectiveness of your current estate plan.

Retirement is a major life event!

By performing an estate planning reassessment in or near retirement, you may better protect your assets and ensure that your legacy is handled in the way you intend.

When should you revisit your estate plan?

You should review your estate plan every 3-5 years. Additionally, major life changes could also necessitate updating your estate plan. These changes could include marriage or divorce, shifts in your financial situation, or retirement.

Key Reasons to Revisit Your Estate Plan Before Retirement

Changing financial situation

As you enter retirement, your financial situation may change dramatically. You may rely on a pension plan, retirement savings, investments, and other savings. Additionally, as you age, you become increasingly eligible for advantageous tax breaks and benefits. For example, once you’re 50, you can contribute an additional $1000 to your IRA up to a total of $8000.

By revisiting your estate plan, you can:

Reassess how your assets are distributed and how tax laws impact them.
Ensure that the beneficiaries of your IRAs, 401(k)s, and life insurance policies are up to date.
Consult a tax professional to understand how your estate may be affected by tax laws, especially since retirement accounts may have different tax treatment than other assets.
Consider the financial benefits of downsizing your home.

How should your estate plan address health concerns?

As we age, health concerns may surface. Revisiting your estate plan near retirement is the perfect opportunity to ensure your estate plan addresses medical decision-making.

Here are two important things to keep in mind:

Update your power of attorney.
- Power of attorney allows someone you trust to manage your finances on your behalf if you are unable to do so. Make sure your power of attorney is someone who knows your preferences and can act in your best interest.
Ensure health care directives are in place.
- A living will, or health care directive, provides instructions for medical care if you are unable to communicate your preferences. Consider designating a health care proxy who can make medical decisions on your behalf.

Ensuring Your Legacy Reflects Your Current Values

Over time your goals and values may change. Your new financial situation in retirement may impact the legacy you wish to leave behind. When revisiting your estate plan, make sure to have clearly defined legacy goals. Those goals could include:

Leaving assets for your children or grandchildren.
Contributing to a grandchild’s college fund.
Donating to a cause or charity close to your heart.

Remember, your estate plan should reflect what’s important to you now, in retirement, not just when you initially completed it.

Family Dynamics and Change

Your family dynamics may have shifted since you prepared your estate plan. Marriage, divorce, and children becoming independent can all influence how you want to distribute your assets.

When revisiting your estate plan, consider:

Updating your plan to reflect new relationships or exclude those that no longer apply.
Adjusting asset distribution to align with your current family structure.

Protecting Your Assets in Retirement

In retirement, you may rely on your savings and investments more than you did in the past. It’s wise to ensure your estate plan protects your hard-earned assets.

Consider the following:

Your financial goals, lifestyle, and risk tolerance.
Whether an aggressive portfolio still makes sense or if it’s time to shift to a more conservative strategy.
Protecting your assets from unexpected medical costs or long-term care needs.

Align Estate Plan with Retirement Goals

Your estate plans may include more than just financial security. While preparing for retirement, you may decide to move to a new city, state, or even country. Maybe you don’t want to completely stop working and are considering funding a family business.

Regardless of your goals, revisiting your estate plan gives you a chance to ensure your goals are aligned with your financial and legal structures.

Be open and transparent with your family, especially heirs and trustees, about your estate planning goals. Also, consider how your estate planning addresses long-term care expenses. Long-term care insurance or provisions for nursing home expenses may be critical to maintaining your retirement lifestyle.

Important Considerations When Revisiting Your Estate Plan

Review your beneficiary designations as they relate to your retirement. Beneficiary designations on retirement accounts and insurance policies often override the instructions in a will.

Will and trusts may be useful for protecting your assets and ensuring a smooth transfer of wealth. It's important to regularly review them to ensure they are still funded and aligned with your overall goals.

Tax laws change frequently. It may be worth reviewing your estate plan with a tax professional to ensure it reflects current tax rules, especially in regard to estate and inheritance taxes.

Implement Your Estate Plan with Chatterton & Associates

The CERTIFIED FINANCIAL PLANNERS™️ of Chatterton & Associates and the estate planning attorneys of James F. Roberts and Associates have been collaborating for more than 15 years and have decades of combined experience. If you are approaching retirement, take a look at our retirement and estate planning services or contact us to schedule a consultation

Sincerely,

The Team at Chatterton & Associates