SEATTLE — Should I keep my house, or sell it? Should I open up an IRA?
There are so many questions when it comes to planning for retirement. KING 5 got some tips from two Seattle financial advisors.
Upgrade your “back-of-a-napkin” plan
Ed Erickson, managing partner at Mass Mutual in Seattle, says the biggest mistake people make is assuming their “back-of-the-napkin” plan (i.e., “sell everything we have and split it evenly among the kids”) is good enough.
It’s not, Erickson says.
“That won’t hold up in court, and it can tie up your estate for years,” he said.
He says it’s imperative to get a legal will, and on top of that it’s important for adults to meet with their parents to discuss long-term financial and housing plans.
“What’s the plan for life insurance?” Erickson said. “If you need housing, which kid will you live with, or will you be happy in an adult care facility? It’s hard, but it’s better to have those conversations before [any action] is needed, and it gets super stressful.”
Consider selling your house
It sounds counterproductive – you just spent 30 years paying off your mortgage. Shouldn’t you enjoy life without mortgage payments? Not necessarily, according to Erickson.
“The biggest questions I get from new clients who are older is, ‘Should I downsize or not?’ Most people’s biggest asset is their house, but you have to be able to create income off of your assets,” he said. “Often, selling your biggest asset is not a bad idea, especially if you don’t have a lot of savings lying around.”
In other words, if you’ve got a big nest egg, you don’t have to sell. But if you retire without much else, selling your home might create that financial nest egg to last through your golden years.
Don’t outlive your money
“When you head into retirement, there are two things you want to hedge against,” Jamison Russ, a financial advisor at Mass Mutual, said. “One – that you’ve saved enough that you don’t outlive your money. And two, plan for long-term care costs, because the need for long-term care could destroy your estate.”
Plan for both the best case (you live to be 110 years old in perfect health) and worst-case (you need 24/7, live-in help after an unexpected health turn) scenarios.
Consolidate your assets
Almost every financial advisor agrees that as a worker in your 30s, 40s, and 50s, you should diversify your assets.
But as you approach or are in retirement, Russ says you should actually consolidate your assets, so that it’s easier for you, and eventually your next of kin, to manage all of your money.
If your children have to take over your finances, don’t make them go on wild goose hunts just to find your money.
How much money can I retire on?
That’s the whopper. How much is enough?
Both Erickson and Russ agreed it depends. If you have grandkids all over the country or a second home in Lake Chelan, it changes the equation. So does inflation.
But all things being equal? About $50,000 per year.
So even with a million tucked away, that’s only enough to last you 20 years. What if you’re blessed enough to live longer?