Notes from McLaren

The estate plan is an integral part of the financial planning process. During life, it provides guidance when you can no longer make decisions because of disability or incapacity. When you pass away, it sets the road map for wealth transfers, guardianship of minor children, and the legacy you wish to leave behind. A well-drafted estate plan clearly outlines your future intentions, promotes family harmony, and protects your wealth. Without a plan, your final estate could result in family conflicts and costly legal actions.

The investing universe is a continuously changing place, and before the ink on this note dries, it will likely look different. What happens next is uncertain, but in the past few months we’ve learned the lessons of another cycle, and those lessons seem to repeat themselves regardless of the market’s trajectory: (1) investing is emotional, (2) risk never goes away, and (3) investment returns require patience in the face of adversity.

Regardless of your politics, many retirees (and non-retirees) will benefit from lower taxes due to the Tax Cuts and Jobs Act put into effect in January of 2018. With the increase in the standard deduction and lower tax rates, taking income from your retirement accounts could cost you less in taxes than in previous years. This gives retirees an opportunity to do some strategic income and tax planning in the early years of retirement.

Losing a family member is one of most challenging life events many of us will ever experience. In many instances, the grieving process is coupled with tremendous responsibility – managing final arrangements, supervising assets and affairs, and settling the estate. We’ve helped a number of investors navigate this difficult process.

Rather than asking, “Can I retire at 67?”, work with your advisor to understand what retirement at various ages would look like, and what resources are necessary to maintain a suitable lifestyle at each of those ages. Preparing for many outcomes in your early fifties will make the unexpected less painful, and provide more peace of mind throughout your last working years.

A good estate plan covers most of what you need for legacy planning, but far too many retirees turn a blind eye to how the plan provides for retirement assets. And here’s the kicker – your estate plan, no matter how good, doesn’t govern the transfer of your retirement accounts – including any IRA, 401(k), 403(b), or 457(b). Retirement plans require account owners to execute “beneficiary designation forms” and then transfer assets directly to whoever is listed on the form – regardless of what you write in your will or trust.