Every adult should have at least a basic estate plan in place. Most adults also start planning for retirement shortly after beginning their first ârealâ job. To ensure that your retirement plan and your estate plan work in harmony with one another, you should work closely with both a financial advisor and an estate planning attorney. To get you started, the Essex Junction attorneys at Unsworth LaPlante, PLLC offer some tips to help you merge your retirement plan with your estate plan.
Estate vs. Retirement Planning
When you are still relatively young, your estate plan and your retirement plan may not have a lot in common. Your estate plan will likely be focused almost entirely on the distribution of your assets in the event of your unexpected death while your retirement plan will effectively consist of saving as much money as possible. Those rudimentary plans, however, will grow throughout the years and become much more complex. As you near your retirement years, you may realize that your retirement plan and your estate plan are inextricably intertwined.
Blending Your Retirement Plan with Your Estate Plan
As you get closer to retiring, you should review your retirement plan to ensure that you are on tract to be financially secure during your âGolden Years.â While your retirement planning steps have largely focused on saving and growing money, your estate plan will help protect the money and assets you have accumulated. Not only will your estate plan determine what happens to money and other assets remaining at the time of your death, but it should also plan for the possibility of your incapacity and/or the likelihood that you (or a spouse) will need long-term care at some point down the road. To help merge retirement planning with your existing estate plan, consider the following tips:
- Estimate income. You should have a general idea of what your income will be after you retire. This does not include the value of assets or the principal held in a trust. Only use income sources, such as Social Security retirement benefits, pensions, VA benefits, or interest disbursements from a trust agreement.
- Maximize retirement plan contributions. Like many Americans, you may have a 401(k), an IRA, or another self-directed retirement account. If so, consider maximizing contributions for the years remaining before you reach retirement age. If you are 50 years old or older, the maximum yearly contribution limit has increased, allowing you to save a little more money for retirement.
- Plan for the high cost of long-term care. The average cost of a year in a long-term care facility in Vermont was just over $130,000 in 2022. Because Medicare does not cover the cost of LTC, you may be stuck paying out of pocket unless you qualify for Medicaid. Medicaid, however, has very low income and asset limits that can be problematic. The key is to include Medicaid planning in your retirement/estate planning endeavors long before you need long-term care.
- Plan for the possibility of incapacity. To protect both your wishes and your assets, you need to plan for the possibility of your own incapacity. Who should control your money and assets if you are incapacitated? Who should make healthcare decisions for you if you are unable to make them yourself? To make sure that your chosen agents have the legal authority necessary to make decisions and/or control your assets, you may need to execute advance directives, a financial Power of Attorney, or even establish a revocable living trust.
- Review and update your estate plan. Finally, for your retirement plan to work within your estate plan, you should review your estate plan and update anything that might interfere with or conflict with your retirement plans.
Do You Need Help with Retirement Planning?
For more information, please attend one of our upcoming FREE webinars. If you need assistance merging your retirement and estate plans, contact an experienced Essex Junction estate planning attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.
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