As you move closer to retirement, it’s important to define exactly what retirement means for you.
Is it an opportunity for you to start a new career? Do you want to devote more time to your family? Or fishing? Will you pursue a hobby that you’ve had little time for during your working life? Or will you strengthen your commitment to your favourite charity?
Regardless of the life you see ahead of yourself, planning for retirement in your later leadership years can have a large impact on your quality of life after work, while also giving you something to look forward to.
Your income structure is likely more extensive than ever before, and it is imperative to have a strategy for replacing it in your retirement years. You likely need to consider cashing out your executive benefits in a tax-efficient manner. It is not unusual for concentrated positions in your portfolio to have gone unmanaged over the years. It is also the time that complicated tax issues are likely to emerge, and your wealth transfer requirements may be only partly formed.
Perfecting your Plan
Your wealth management plan should incorporate 2 separate strategies: 1 for your transition out of the workforce, and 1 for your time in retirement. Be sure to exploit every possible opportunity as you move into retirement and that the life you envision is the one you lead.
Here are 4 important tips that can help:
Confirm and adjust goals
Revisit long-term goals and make whatever adjustments are necessary to reflect possible new expenses, spending changes, and cash flow expectations. Update family and legacy goals. You will likely need to adjust your income plan based on lower return expectations for the current soft economy and slower growth outlook. Ensure market realities don’t undo everything you've worked so hard to create.
Refine and execute your plan
A total portfolio asset allocation strategy remains vitally important as you near retirement. Investments must be coordinated and plans must consider your entire situation and goals.
Solidify your wealth protection and transfer strategies
Secure your legacy by updating and implementing wealth protection and transfer strategies. Look to leverage the role of philanthropy and solidify family governance plans to ensure your beneficiaries are ready to properly manage your assets when the time arrives.
Create a retirement distribution plan
Your last few working years are the final opportunity for you to maximise the value of your retirement benefits and savings whilst minimising tax. Make sure strategies are in place for managing distributions, and getting the timing right. Should you cash out your superannuation or roll into pension phase? Are there assets you need to sell to fund a greater superannuation balance? Will gifting impact your situation? Are there capital gains tax gains or losses to maximise? Consider all tax, investment and regulatory implications to ensure your decisions are optimal and fully address lifetime income needs.
Managing concentrated positions
Moving away from a concentrated investment position presents a two-fold challenge. You must diversify your portfolio while managing tax implications. These two components must be balanced with your personal goals and circumstances.
Firstly, fully quantify scope. Your advisor can help you analyse all your compensation arrangements and investments to clearly identify if you have a concentrated position in property or a particular share. Only then can you create a unified plan that may involve different strategies, such as:
1. Selling and diversifying assets:
This approach is usually implemented with an outright sale of particular assets. The goal is to liquidate concentrated positions and reuse assets in a more diversified portfolio
Philanthropy affords significant benefits in terms of reduction of income and therefore taxes. It also provides you with the opportunity to pass on values to future generations by building a legacy of sharing.
Choose a team
Creating and carrying out a wealth plan based on your particular career stage is vitally important. Ongoing management and expertise are equally instrumental in helping you implement your long-term goals, and keeping you on track.
Find and work with an advisor who has a deep understanding of wealth management, as well as proven experience with executives and their complicated packages. The right mindset is also vitally important. Keep your advisor active and accountable, and remember that everything you do needs to be based on your long-term goals. Include other professionals you trust such as lawyers and accountants, and build a team of people working with your best interests at heart. It may come at a cost, but it’s worth the time and investment to leave it to the professionals, so that you can concentrate on doing what you love and what you’re best at.
Finding the team that’s right for you is a very personal undertaking and may require a bit of due diligence. But it is well worth the effort.