The first step to take when planning for retirement is to enlist the services of a competent financial advisor to prepare a personal financial plan.   With your input, the advisor will help you to carefully consider your goals and help define your present and forecasted financial situation.  Remember that the planning process begins with first defining your short and long range goals by assembling information regarding your family situation and major anticipated financial obligations.

Defining and understanding your financial goals include the following:

  1. Estimation of the anticipated number of years before retirement
  2. Preparation of a budget listing anticipated expenses divided into non-discretionary expenses such as food, medical expenses, and shelter and discretionary expenses such as travel, hobbies, and entertainment
  3. Determination of income sources at retirement such as Social Security income, pension income, earnings from investments (to be discussed) and potential part-time work.

Important Items to Consider

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  1. The impact of inflation is an important factor.  If inflation is not taken into consideration, you will be misled into thinking you have sufficient assets for the duration of your retirement.  For example, if your expenses in today’s dollars amount to $100,000 you might think that this amount will be sufficient for expenses during your lifetime.  However, a three (3%) percent inflation rate would turn that $100,000 into the equivalent of $134,000 in ten years and $180,000 in twenty years.  As you can see, your income would be insufficient to cover the inflated expenses.
  2. Investment rate of return is another aspect to be addressed in the financial plan.  This rate of return will be based on the investment objectives chosen with consideration of your age and short-term and long-term goals.  An astute investment advisor can create a diversified portfolio to meet your individual needs.
  3. A risk factor to be considered is the possible need of funds for long-term care.  If either spouse requires long-term care, the cost could exceed $100,000 per year.  Since the average length of stay in a long-term care facility is approximately three years, the cost could realistically amount to over $300,000.  Assets could be depleted to such an extent that the remaining spouse could no longer maintain an accustomed lifestyle.  The purchase of a long-term care policy is a possible solution to this potential problem.

Estate Planning Considerations

Developing an estate plan is the process of protecting assets and distributing them according to your wishes.  As part of the estate plan, certain documents are needed:

  1. The Last Will and Testament is a document that dictates the distribution of your probatable assets.  Without a Will, assets are distributed according to the laws of intestacy and not according to your intentions.   While reviewing each asset, ascertain that the beneficiaries are correctly stated.
  2. A general Power of Attorney ensures that you have a designated individual to act on your behalf in financial matters.
  3. A Living Will empowers a designated individual to make decisions regarding the use or withholding of life sustaining measures.
  4. A Trust is a legal document created to transfer property to one individual to hold for the benefit of another individual.   Various types of trusts can be used for both tax and non-tax reasons.  A living trust can be created during your lifetime or a testamentary trust can be created by will upon your death.  Trusts can be revocable, with the right to change during your lifetime, or irrevocable, with the grantor giving up control over the trust property.  Irrevocable trusts cannot be terminated. 

In summarization, keep in mind that the earlier you start creating a proper retirement and estate plan, the easier it will be to realize your financial goals and to achieve a secure retirement.

Steven L. Levine, CPA/PFS/CGMA is a founding and senior member of Levine, Jacobs & Company, LLC. He can be reached at