If you are still in your 20s, you probably think you are too young to be thinking about your retirement. The time to start planning for your retirement, however, is when you first start working. If you are nearing retirement age and have yet to create a retirement plan, you may be concerned that it is too late to get started; however, it is never too late to think about your retirement plans. Like most people though, you may not know where to begin. Yes, you need to save money for your retirement but how? Where? How much? These questions, and many more, must be answered before you can create a successful retirement plan that will protect your assets and provide for you during your “Golden Years.” Because your retirement plan will be highly individualized, it is always best to consult with both your financial advisor and your Massachusetts estate planning attorney before getting started on your plan. Having a general retirement guide to refer to, however, may also be helpful as you contemplate your retirement plan.
Why Is Starting Early So Important?
You have likely heard how important it is to start planning for your retirement as early on in life as possible…but why is it so important? The simple answer is that the earlier you start the less you need to save. To illustrate, consider the following:
If you start saving at age 25 by putting $3,000 a year in a tax-deferred retirement account for 10 years and then stop adding to your account, you will stop at age 35. Using a 7 percent interest rate, your $30,000 investment will have grown to more than $338,000 by the time you are ready to retire at age 65 even though you did not save another dollar after you turned 35.
Conversely, if you start saving for your retirement at age 35 and contribute the same $3000 per year for the next 30 years, you would probably assume you would amass more money by the time you reach retirement age since you saved for 30 years instead of just 10 years. The reality, however, is that while you would have saved a whopping $90,000 of your own money under this scenario, that $90,000 would only have grown to $303,000 by the time you retire which means you would actually save $35,000 more by starting early and contributing for fewer years than by starting later and contributing for more years.
Medicaid Planning – Why It Should Be Part of Your Retirement Plan
From the time you enter your “Golden Years” your odds of needing long-term care go up with each passing year. Paying for that care may require you to qualify for Medicaid. Medicaid eligibility, however, takes into account your income and assets. If the value of your countable resources exceeds the very low program limit you will be expected to use those assets to cover your expenses before Medicaid will start contributing. Medicaid planning uses legal tools and strategies to protect your assets while ensuring that you will qualify for benefits if you need them.
Asset Protection Strategies in Your Retirement Guide
Saving money and/or amassing assets to be used for your retirement will only benefit you if you also protect those assets in the meantime. Threats to your assets can come in many forms, including divorce, bankruptcy, or creditors. Fortunately, asset protection is a very common estate planning component and one that frequently involves establishing an irrevocable living trust. By transferring assets into an irrevocable trust they are outside of the reach of creditors and are safe from divorce or bankruptcy.
Your Estate Plan
Retirement planning should be part of a larger, comprehensive estate plan. Your estate plan, in turn, should include a number of components that are all interrelated, such as incapacity planning, probate avoidance, and tax planning. Throughout your lifetime you will work hard and save wisely in order to live comfortably during your retirement years and have something left over to leave your loved ones. Without an estate plan in place though, the assets left in your estate when you are gone will be distributed according to the intestate succession laws of the state in which you are a resident at the time of your death. Don’t let that happen. Be sure to have a well thought out estate plan in place early on in your life and consult with your estate planning attorney on a regular basis throughout your lifetime to make sure any necessary revisions to your estate plan are taken care of in a timely manner.
For additional information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding your Massachusetts retirement guide, contact the experienced New Hampshire estate planning attorneys at Debruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
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