What’s the Difference Between Retirement Planning and Estate Planning?

Written by Jeff Helms

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June 23, 2015


What’s the Difference Between Retirement Planning and Estate Planning?-media-1

For many people, the goal in life is to accumulate wealth, retire comfortably and provide a significant inheritance to all heirs. How to save and plan for your retirement along with the inheritance you’d like to leave your heirs is where it can get murky.

Saving feels good, especially since we’re hyper-focused on it for most of our lives. But don’t get too wrapped up in saving for your estate when the main focus should be on ensuring you are able to support yourself for the duration of your retirement years. While retirement and estate planning are linked, you need to prioritize correctly for everyone to benefit.

Retirement Planning: Focus on You

Your first priority needs to be retirement planning. If you don’t put retirement first, you risk becoming a burden to your children when you can no longer support yourself. This makes for an unhappy retirement and reduces your children’s inheritance. Your retirement planning should be all about you and ensuring you’ll have a comfortable lifestyle. This includes accounting for the expense of a potential chronic illness, thus ensuring your children or other relatives won’t need to take care of you when you’re older.

Before you retire, you should first create a budget for how your life will be after work. This is a time you’ll really need to think about your goals. At what age would you like to retire? Where do you want to live? What do you want to do? What kind of lifestyle do you want to have in retirement?

You’ll then need to plan withdrawals accordingly with your investment and retirement accounts. Typical retirement savings include 401(k) and IRA accounts. (You generally cannot withdraw from a 401(k) or IRA until you’re 59 1/2 years old without a penalty.) Once you’re over 70 1/2, you’re required to make withdrawals from a Traditional IRA account every year.

Estate Planning: Get Your Affairs in Order

Your estate is what you leave behind to your heirs. It includes what is left in your retirement accounts, savings, your real estate and insurance policies. When you make saving for your estate a priority, you feed the savings habit that was drilled into you for most of your life, but now in retirement, it could have a negative impact on you and your family. While this concept may be tough to reconcile in your head, you need to be able to shift that savings mindset.

After you retire, you need to be less concerned about saving and more focused on setting up what happens to your estate when you pass.

You will need to establish:

It may also be wise to set up a trust, which will establish conditions on how and when your assets will be distributed, as well as potentially reduce some of the tax burden that comes with inheritance.

First Coast Wealth Advisors are your retirement planning experts. We’re here to help you meet your goals and come up with a plan that uses strategies to achieve the right balance between retirement and estate planning. Contact us today and we’ll get started on making the right plan for you.