Transition Thursday Webinars: Retirement Planning

by Amber Roberts, Extension Educator

Whether you are only a few years away from retirement or just starting your career, now is the time to start thinking about retirement planning. In this webinar, Extension Educator Dave Bau, discusses how to determine retirement expenses, and plan for long-term health. Timestamps for each discussion point in the webinar are listed.  

How much money is needed for retirement? (starts at 7:01)

Retirement planning requires an individual to assess how much saving they will need to be able to maintain thier lifestyle after retirement. A general rule of thumb for retirement is that you will want to have saved about 80% of your current working income for each year of retirement. Inflation should also be factored into saving for retirement; if you retire at 70 and are retired for 20 years, inflation will affect your retirement savings. The Post-Retirement Living Worksheet (page 19) can help you determine how much money you should save. A similar of this worksheet is shown below, where individuals can list thier current expenses, expected expesense changes in retirement, and determine future retirement expenses. 

(starts at 10:45)

It's important to recognize that your retirement spending may fluctuate over time. Bau describes the three distinct phases of retirement: go-go, slow-go, and no-go. In the go-go phase, "you have the healthy and the financial resources to be active and do lots of things." During this phase, you might need more money to finance activities and travel than later on in retirement. In the slow-go phase or second stage of retirement, retirees start to slow down and don't do as many activities. The no-go phase is the final phase where retirees don't leave the house as much. During this phase, expenses may go down significantly unless retirees require nursing home or in-home care which can greatly increase expenses. 

How should I incorporate healthcare planning? (starts at 35:52)

A health care directive can list your wishes regarding how you want to receive medical treatment and allows your selected family and friends to legally be informed of your medical status. You can also appoint a health care agent and authorize them to make medical decisions.  A health care directive form can be obtained from your local hospital or doctor.  If neither has a form that they use, the University of Minnesota Extension also has a free fill-in-the-blank health care directive with a planning tool.

When thinking about retirement, long-term care should also be factored into the planning processing.  One in every two Americans will spend some time in the nursing home and the cost of long-term care can add up quickly. Nearly 10% of people will spend over 10 years in a retirement facility. There are several resources that can help protect your farm's assets in case long-term care is needed. Life insurance is a tool that can be used in your transition plan to protect the business or provide income for debt payments. It can also be useful if long-term care ends up taking much of your retirement savings.

What are the next steps I can take in my transition planning process? (starts at 43:40)

Bau recommends meeting with a transition planning specialist, first, I would encourage you to do your goals, what do you want to see accomplished with your estate plan?" Once you have your goals for your farm's transition, then meet with your tax professional or accountant to review your estate plan. During this meeting, determine the tax consequence of your decision, whether you have enough retirement income for your retirement goals,  and how you want to transfer assets. Having your goals drafted ahead of meeting with a tax or legal professional will save you time and money.