If you have retirement savings, a family, or a worthy cause that you champion, you should know exactly where you stand when it comes to estate planning.
Many people assume that it’s just for the very wealthy or something you can put off forever. But it’s vital to address your situation in the current moment, make a plan, and start preparing, especially if you have dependents.
It’s also a good time to take advantage of the current rules and regulations before changes are enacted that could affect your strategy. Let’s dive into why estate planning is so important and how you can take steps to ensure you and your loved ones are provided for.
Ride the Wave
You may have heard the term “silver tsunami,” and no, it’s not the latest Marvel character — it’s just a term for the simple and unavoidable fact that the baby boomers are aging.
By 2030, everyone in this generation will be 65 or above, making senior citizens the world’s fastest-growing demographic.
By 2034, older adults will outnumber children for the first time in our history.
This rising population of seniors means that the US will face some unique challenges in the coming years. Employers will have to adjust to the healthcare situations of older workers unless they’re prepared to lose their most experienced and expert workers to retirement.
But not everyone looks forward to quitting their jobs and playing golf. Many seniors continue working and earning and building their wealth for as long as possible. Others are delighted to cash in early and set off to see the world or tour the country in an RV on the way to Burning Man.
While geriatric research and Medicare will see a drastic increase in spending, more people than ever are focused on being active and embracing health and wellness ideals. The stereotype of the sedate senior is fizzling out fast.
Playing the Long Game
If you have any assets, you should have an estate plan. Many people hear the term and assume it just applies to mansions, vast piles of cash, and a host of squabbling heirs.
An estate plan can benefit everyone, regardless of how much they own or whether they have children. If you don’t have a will or estate plan on record and become incapacitated, your state’s laws and probate courts will be making decisions on the disbursement of your assets, which could be the exact opposite of what you would have wanted.
It’s especially crucial to put your wishes in writing for who should have power of attorney and the ability to make medical decisions on your behalf if you cannot, even temporarily.
Enjoying a longer life expectancy also increases the importance of working with a financial advisor to ensure adequate funds are allocated to long-term care costs. Hybrid life/ LTC insurance products are gaining in popularity, and these policies should definitely be a consideration.
Millions of Americans will have caregivers who are worried about finances, but by planning, you’ll avoid all that stress and enjoy comfort and peace of mind.
A Good Defense
We are living in uncertain times, which is another reason why working with an advisor with a fiduciary obligation is so critical. They’ll play a vital role in diversifying your assets into sustainable investments that will help weather any storm.
Inflation is also a big concern. As prices rise, you’ll need to grow your income accordingly to ensure you can continue to enjoy the same standard of living.
An inflation-protected annuity fully vetted by your advisor, can provide reliable income and a hedge against higher costs. Unfortunately, the specter of inflation will always be with us, but a well-researched estate plan offers a better rate of return.
With an aging population comes a transfer of wealth, which is attracting the attention of lawmakers looking for taxable funds. While federal estate taxes only apply (for now) to those with assets over $12M, several states have inheritance tax regulations that affect more citizens.
Your estate planner can help you set up trusts, make gifts, or invest in life insurance to allocate your wealth to your heirs as you wish. Of course, the best things to give are appreciating assets, such as rental property, a real estate investment trust, or a diversified portfolio of stocks.
Investing in tax-friendly Roth IRA accounts can also be a key component of a comprehensive estate plan. High-income taxpayers may want to learn more about the “backdoor Roth IRA” strategy with an advisor who’s genuinely skilled in managing tax-deferred investments.
The Bottom Line
Aging baby boomers equals a growing surge in the senior citizen population. As this demographic grows, new advancements in medicine and technology add to our longevity, necessitating even savvier financial planning to ensure funding for the long haul.
Part of a successful overall retirement strategy is your estate plan. More than just a will, it’s an all-inclusive directive for ensuring your long-term care needs are provided for should you become incapacitated and that your assets are disbursed to your chosen beneficiaries, precisely as you would wish.
If you’re ready to take control, I can help. With over 38 years of experience in the financial markets, I’m uniquely qualified to help you craft a highly personalized game plan now and for the future. Reach out today to schedule a complimentary consultation!