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Considerations in Your 70s

Living in retirement

Make the most of your investments—and life

Retirement planning doesn’t stop when you retire. Even if you’ve followed a plan to save for retirement, it’s equally important to have a plan that is designed to help meet your needs throughout your retirement.

Your in-retirement plan should include your income plan — how you pay yourself in retirement — and your estate plan.
Generate income while making your money last
Whether you are already retired or still working, at this stage of your life your tolerance for risk may have changed. You need to protect the value of your retirement savings, yet grow them enough to both outpace inflation and to provide enough income to cover your living expenses.

This can become a balancing act between drawing down your savings too quickly and being left with little to live on in your 80s or 90s, or the opposite scenario of spending your income too slowly and needlessly crimping your standard of living.

How do you ensure you’re not taking on too much risk in the market versus too little risk to still grow your assets?

One approach is to hold income-producing securities. You periodically withdraw the interest and dividends to live on. Immediate annuities, bonds or CDs, and stocks are typical income-producing investments. Another approach involves maintaining a growth-oriented asset allocation while periodically selling a portion of your stock funds to generate cash. (Selling stocks could trigger taxes, so you should discuss this strategy with your tax advisor first.) Of course, you must be comfortable with the risk of each investment strategy.

It is important to have a plan that reflects both realistic expectations and your own comfort level.
Withdrawal rates: Several factors can play an important role when calculating how much of your retirement money you will spend each year, referred to as your withdrawal rate.
  • Think about how long you might live. You must factor in the possibility of funding 30 or more years in retirement.
  • Consider market conditions. Investment portfolios don’t return a pre-planned figure every year. They can go down as well as up — as recent years have clearly shown. If you experience a market downturn shortly after retirement, you’ll be left with a reduced portfolio. If you then take money out at a rate that is too high, it seriously reduces your portfolio’s power to recover when times improve.
  • Don’t overlook inflation. For example, if your portfolio grew 7% every year, and you took that 7% to live on, the number of dollars in your investment portfolio would remain flat over time, but your purchasing power would be reduced by inflation.
While you have little control over market volatility and inflation, you can help protect your retirement security by wisely managing one factor that you can control: your withdrawal rate. By withdrawing your income at a conservative rate early in your retirement, you may dramatically prolong the life of your retirement savings — and you may even be able to raise your withdrawal rate later in retirement.
Consider your required minimum distributions: When you turn 70½, by April 1 of the following year, you must begin to take what are called required minimum distributions (RMDs) from your workplace retirement plan (unless you are still working) and your traditional IRAs. This requirement needs to be factored into your income plan.
Simplify: Properly managing your asset allocation and withdrawal strategy can get complicated. If you haven’t already, consider consolidating your retirement accounts to ensure your investment strategy is coordinated and to help simplify the management of your portfolio and calculation of your required minimum distributions.
Reconcile your budget and cash flow: Creating and following a realistic budget can be essential when you’re retired. It helps ensure your money lasts as long as you’ll need it.
  • Understand your basic needs — the essentials — and consider providing for these needs with predictable sources of income, such as Social Security, pensions and annuities.
  • Plan for discretionary expenses and how you will fund them.
  • Consider increasing your emergency reserve fund to cover possible new expenses, particularly in the areas of healthcare and long-term care.
  • Compare your spending strategy to your income strategy — are they consistent with each other, or does your spending strategy need to be adjusted to align with your retirement paycheck?
Estate planning
Design a plan that can protect you, your spouse, and your heirs no matter what life brings. A sound estate plan:
  • Ensures that your assets go to the people you choose when you pass away or are permanently disabled
  • Names a guardian for your minor children
  • Minimizes estate taxes
If estate taxes are likely to cut significantly into the amount you’re able to leave heirs, now might be the time to maximize tax-reducing gift strategies if you haven’t already. Think about charitable organizations that interest you, as well as gifting strategies for your heirs, such as contributing to a grandchild’s educational savings account.
Successful estate planning involves a team of experts: an experienced estate planning attorney, a certified public accountant, and a financial advisor you trust to help manage your estate and preserve and protect your assets. Have an estate planning attorney draft the appropriate documentation. Depending on your circumstances, possible documents include:
  • Will
  • Trust agreement
  • Living will
  • Power of attorney
  • Health care power of attorney
  • List of emergency information
  • Letter of instruction
  • Proper designation of beneficiaries
  • Forms of ownership
Make certain that you share the location of important documents with loved ones. Visit Plan Your Estate for more information on estate planning.
For a list of tips and ideas to help you begin creating your plans for retirement, visit our retirement checklist for your 70s+.
Recordkeeping, trustee and/or custody services are provided by Wells Fargo Institutional Retirement and Trust, a business unit of Wells Fargo Bank, N.A. This information is for educational purposes only and does not constitute investment, financial, tax or legal advice. Please contact your investment, financial, tax or legal advisor regarding your specific needs and situation.