Retirement might be a singular event accompanied by a date on the calendar, but retirement planning is an ongoing affair, even years after you leave the office. 

While your status as a retiree hasn’t likely changed much after ringing in the New Year, you must continue to act as your household’s Chief Financial Officer, so here are five ways to ensure you understand the basics of retirement planning 101 as we turn the calendars to 2023, ranked in order of importance:

Contact your Carolina retirement planners at Triad for any retirement concerns or questions.

1. Review and update your beneficiary designations. 

The most important part of financial planning isn’t investments or insurance or even cash flow management, but estate planning. Although the probability of your time on Earth coming to an end in 2023 may be very low, the negative impact of a lack of estate planning is so high that it demands our immediate attention.

Even so, it may come as a surprise that we’re not first referencing your typical estate planning documents, like your will (we’ll address that in a minute), but that’s for a very good reason: 

Your beneficiary designations will trump whatever your will says. Yes, that means if you just got remarried and updated your will to reflect the change—but your life insurance designation still lists your former spouse as the primary beneficiary—it’s your ex who would receive the life insurance proceeds in the case of your untimely demise. 

Also, because we don’t want to rely solely on the back office of our financial institutions, so active in mergers and acquisitions, we recommend reviewing these important designations every year to ensure they are accurate.

Therefore, please review any account that has a beneficiary designation—retirement account, insurance policy, annuity, a bank account with POD (payable on death) designation, or investment account with TOD (transfer on death) designation—to ensure they are correct and synced up with your estate planning documents.

These designations are made even more powerful when you have secondary and even tertiary designations to ensure your wishes will be served even in the most unlikely of outcomes. And it’s important to also understand the difference between beneficiary designations that are “per stirpes” and “per capita.”

What’s the difference? Let’s say you have three children, each of whom is slated to receive one-third of your retirement investments. In the unlikely and unwelcome case that one of your children was to predecease you, a “per capita” designation would result in the remaining two beneficiaries receiving the entirety of your account with one half flowing to each, whereas, in the case of a “per stirpes” designation, the one-third of the account that was slated to flow to the predeceased child would now flow to his or her lineal descendants—in this case, your grandchildren.

We find that while most beneficiary designations default to “per capita,” most clients would prefer “per stirpes,” but either way, it is your decision—and designation—to make.

2. Make any necessary changes to your estate planning documents.

One of the only constants in life is change, which is especially true in matters of money when considering the perpetual shifting of state and federal tax and estate laws and the financial markets. Therefore, after confirming your beneficiary designations align with your long-term values and goals, we recommend turning your attention to your estate planning documents.

Virtually every household in retirement should have three primary documents for each adult at a minimum:

• A will
• A durable power of attorney
• Advance directives (including a health care power of attorney and a “living will”)’

Your will directs the flow of your assets—known as your estate after you’re gone—that is not otherwise directed by asset titling or, you guessed it, beneficiary designations. In addition to determining where your assets will go, you’ll also populate up to three offices in your will:

• The personal representative (aka as an executor or executrix in some states) is the detail-minded person responsible for walking your estate through the probate process
• A guardian who would assume parental responsibilities for any minor children
• A trustee who would be responsible for the financial stewardship of any trusts established in your will for beneficiaries of any age

While it may be convenient to list a single person to fill all three offices, it’s very rare that one person in your life is optimally suited to be all three. It may also reduce the potential for conflicts of interest to separate the roles. 

Your durable power of attorney gives someone the ability to act on your behalf in financial matters if you’re unable, or possibly unavailable, to act. A “springing” power gives your designee the ability to act on your behalf only if certain conditions are met—like a disabling injury that has left you incapacitated—while a non-springing power would enable your attorney-in-fact to act in your stead regardless.

Advance directives include a health care power of attorney—a document enabling someone else to make medical decisions on your behalf, either springing or not—and a “living will,” or instructions for your HCPOA regarding how you’d like end-of-life decisions to be made.

Yes, these are the minimum estate planning documents for most to consider. Many others will warrant the utilization of more, and often more complex, vehicles like life estate deeds, trusts, and LLCs to own or direct their assets.

I realize that most of us aren’t excited about doing this work because we’re not fired up about mulling over the notion of our demise or disability—but how much better to make these decisions ourselves than to leave them to others (including the state) to sort out?

And yes, the ideal would be to have at least secondary, if not also tertiary, layers of designees for each of the several offices listed above to ensure that none of these offices are left vacated, even if by choice.

3. Review cash flow sources and needs.

The foremost predictor of every successful financial plan is not the easiest but the simplest: a cash flow system that results in more revenue than expenses. And when planning for retirement, the stakes are higher because there are ordinarily fewer income sources, and the income sources that do exist are those over which we have less control.

A good starting point is to take stock of your cash flow sources. The good ol’ three-legged stool of retirement income is a decent start:

1. Any pension income or deferred compensation accrued while working
2. Your Social Security retirement benefit(s)
3. A sustainable stream of income from your personal savings

As corporate pensions are on the decline, there is even more pressure on the remaining stilts. That is why, if you haven’t yet made the elections for your Social Security income stream(s), it’s even more important to maximize that revenue source. 

Furthermore, whether from 401(k)s, 403(b)s, TSPs, TSAs, IRAs, Roth IRAs, annuities, or taxable retirement investment accounts, the fact that retirements are trending longer as Americans longevity rises to make the word “sustainable” operative in determining precisely how much income you are creating from your personal savings.

Once you’ve determined the ideal mix, measure, and method of income generation in retirement, it’s time to honestly estimate your spending. And while most of us presume that we’ll spend less money in retirement than in our peak income years, often preceding retirement, the reality is often different. 

The Greensboro certified financial planners at Triad can help you determine an accurate budget for your retirement plan.

Consider your retirement spending in the form of a three-act play:

• Act I: The Go-Go Years – Often, the early years of retirement are filled with newfound travel, hobbies, and lifestyle exploration, resulting in a rate of spending that is often as high or even higher than your last few working years.
• Act II: The Slow-Go Years – After you’ve gotten some early-retirement adventure out of your system and aged several years in the process, you may settle into a slightly less active stretch that is also less expensive. But note that this stage of life for you often corresponds with the most expensive stage of life for your children and grandchildren, when grandparents often subsidize college or other expenses.
• Act III: The No-Go Years – We’re all facing the reality of aging, and the time will inevitably come when we experience a meaningful decrease in mobility. Yet while this lifestyle may be less expensive, healthcare costs are often on the rise.

4. Evaluate your current investments and make changes as needed.

After you’ve reviewed your income sources, including the income derived from your investment accounts, it’s a great time to evaluate your current investment allocation and make any changes as necessary. Assuming you have worked to gauge your ability and willingness effectively and need to take risks and develop a portfolio strategy that adequately reflects your risk tolerance, any changes should likely be small—reallocations and calibrations.

But if your investment portfolio is more like a collection of securities than a cohesive strategy, it may also be time for an overhaul. Especially in retirement, consider an evidence-based approach that is consistent rather than an emotionally-charged approach that is constantly changing.

5. Get some help and accountability. 

There is a temptation to believe that retirees have fewer financial obstacles to overcome than those earlier in life, but while this may be true, the stakes are even higher in retirement. Time horizons are compressed, income streams are reduced, and mistakes are more costly. 

That makes retaining a trusted financial advisor even more important. The minimum requirements are the following:

• Educated
• Credentialed
• Experienced
• Fiduciary
• Focused

As you can see, the field of financial planning is broad and deep. Therefore, you must work with someone who has received an adequate education. Such education is one of the requirements for anyone who has received the Certified Financial Planner™ or CFP® credential. While it is not the only financial planning credential, it is the standard and a requirement for all Lead Advisors and Senior Advisors at TFA.

In order to carry the CFP® credential, a registered advisor must have a minimum level of experience as well—but you need not settle for the minimum. Consider finding an advisor who has lived—and advised—through multiple market downturns to ensure they’ll provide you with the confidence you’ll need to endure those to come. And don’t settle for anything less than a fiduciary who has committed to acting only in your best interest at all times.

Lastly, find an advisor who is rifle focused on you—an advisor who listens twice as much as he or she speaks, who puts your values and goals at the center of their process, who eschews boilerplate and instead customizes their counsel for every client, and who acts more as a guide than a dictator. 

As Greensboro financial planning professionals, the advisors at Triad have a fiduciary duty to serve your best interests.

As you can see, even the maintenance of a solid retirement plan, much less the establishment, is quite an effort. But by partnering with the right investment advisory team, the process can be clear and concise, giving you the confidence you need to retire with intention.