Planning for Retirement

Regardless of your age, it's never too early—or too late—to plan for your retirement years. Obviously, the sooner you begin to formally plan, the more comfortable and secure your retirement will be. This article is provided to help you identify critical areas of planning. Of course, everyone's personal financial situation and lifestyle goals will vary, but there are some general guidelines to help you get the most out of your retirement years.

Organize your current assets
To get started, put together a file of your current net worth. This should include:

  • Checking and savings accounts
  • Current life insurance benefits
  • Real estate equity
  • Stocks, bonds, and mutual funds
  • Personal retirement savings
  • Collectibles of value

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Develop a retirement budget
Fixed costs

  • It's difficult to estimate future prices for the day-to-day goods and services you'll need during your retirement years. However, based on today's prices, you can itemize the living expenses you anticipate. Food and utilities may increase in costs, but these are expenses that you cannot do without. Also, allow for property taxes, which do not vary whether you are employed or not, but which may offer tax relief to persons age 65 and over.

Variable costs

  • At retirement, you may own your home and not need money for mortgage payments. Is your current housing more than you'll need in the future? With your family grown, you may consider downsizing, or moving to a home that requires less maintenance and upkeep. It may be prudent to take this step prior to retirement so that the expense of settlement and moving can be absorbed during your earning years.
  • You may also find that you'll reduce your vehicle expenses with less commuting miles.

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Review your retirement income options

Social Security

  • Do you qualify for Social Security benefits? How much can you count on? You can get a benefit estimate from the Social Security Administration by calling them at (800) 772-1213. You can also visit their website at for more information.

Employee pension

  • Does your employer provide a retirement pension plan? If so, what are your projected benefits? Will this be enough to meet your anticipated budget expenses? How long will these benefits be provided?

Determine spousal income

  • Once you retire, will your spouse continue to work? Determine whether you can count on additional years of earnings through your spouse.

Establish private savings

  • If you qualify, set up your own personal IRA account. There are many options in doing this. A mutual fund IRA may work for you, or a retirement program offered through your bank may better suit your savings needs. It is best to explore several options before locking in. Also consider that if you are many years from retirement, an aggressive growth fund can rapidly accumulate wealth, but carries higher risk. As you get closer to retirement, a more conservative approach offers less risk but reduced earnings potential.

  • For many individuals, a tax-deferred annuity offers tax advantages for today and income for tomorrow. Again, there is some risk involved, so you need to carefully weigh your individual investment needs.

  • Another option is Universal Life Insurance. This combines life insurance protection with investment options. The AICPA Insurance Programs offer members a high quality Variable Universal Life Plan at affordable cost.

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Make insurance adjustments

Your insurance needs will certainly change as you enter your retirement years. It is important to identify benefits that you will receive if you qualify for a pension package versus those you are responsible for individually. Your budget must allow for these expenses.

Secure health insurance
If you receive a pension program from your employer, does it include health insurance coverage for you and your spouse? If not, you may need to purchase health insurance independently.

  • If you qualify for Medicare, keep in mind that Medicare only pays a percentage of actual costs. You may need to purchase a Medicare Supplement Plan to fill in the gaps in coverage and help avoid out-of-pocket expenses. The AICPA Insurance Programs offer affordable Medicare Supplement Insurance to members.
  • If you've been putting off the purchase of a supplemental insurance plan, you may wish to consider Catastrophe Major Medical Insurance offered by the AICPA Insurance Programs. The plan enhances your basic medical plan, HMO, PPO, or Medicare by providing up to $2,000,000 in additional lifetime benefits. *

Obtain life insurance
Again, if you qualify for a pension program, determine if it includes life insurance coverage. In addition, you also need to consider what these benefits will provide. Final expenses are certainly one concern, but you may also need to provide living expenses for your survivors and cash to pay off debts and other expenses. In making your life insurance decisions, consider your future insurability. Changes in your health could make buying insurance in the future difficult or prohibitively expensive. You may want to purchase enough personal life insurance for your future needs while you are in good health. Then, as your needs change, you can adjust your coverage accordingly. The AICPA Insurance Programs offer several life insurance plans at group rates for CPAs and their families.

Consider long term care insurance
Long term care insurance provides benefits for nursing home, assisted living care expenses, and many other care options. These policies provide guaranteed benefits to help cover the high cost of long term health care. Premiums are based on age at enrollment. By enrolling at a younger age, premiums lock in and do not increase as age increases. The AICPA Insurance Programs offer a long term care insurance plan that is available to CPAs and their spouses, parents, and in-laws.

Contemplate personal liability umbrella insurance
By now you have probably accumulated significant savings that will enable you to enjoy your retirement years. This is the time to consider protecting your assets. One simple and effective way to do this is to have a personal umbrella policy providing you with significant protection from personal liability exposures at an inexpensive cost. The AICPA-sponsored PLUS Plan is available for all retired AICPA members.

Assess professional liability insurance needs
Before leaving your practice behind, it's important to review the Extended Claim Reporting Period (ECRP) coverage provisions of your professional liability insurance. This "tail" coverage protects you against the cost of a lawsuit filed by a previous client, even when you are no longer a practicing CPA. The AICPA Professional Liability Insurance Plan provides automatic tail coverage for insureds and the option to add extended coverage periods.

* Subject to state policy restrictions, coverage limits, and availability

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Investigate financial planning
You may want to consider working with a financial planning professional to help you map out a personal investment strategy. A financial planner can help assess your current assets and identify investment opportunities that can help you maximize income potential. It is a good practice to meet with a financial planner periodically leading up to retirement. First, to establish a retirement strategy, and then, several years later, to assess any adjustments needed. Finally, just prior to retirement, you should meet to implement the distribution of your assets for maximum buying power and to control your tax liability.

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Engage in legal planning
If you haven't already done so, you should meet with an attorney to structure your will and estate distribution plans. This will assure that your assets are distributed according to your wishes and taxes are minimized. Do not rely on drawing up your own last will and testament without professional legal advice.

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Plan some retirement activities
To get the most out of your retirement years, try to plan relaxing activities that you enjoy. Many people make the mistake of leaving a lifetime of whirlwind business activities with no leisure plans. This can lead to anxiety, depression, and even health complications. Try to spend time with family and friends to help keep you involved with the real world and to give you activities to look forward to. Also, take an active role in maintaining your health. Regular health exams can catch problems early on. Proper diet and exercise can help you keep in shape and truly enjoy your retirement years.

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Consult additional resources

  • AICPA member benefits are available to you when buying your retirement home, calling your family and friends, or planning a vacation. The AICPA Affinity programs provide mortgages, discount long distance phone service, credit cards, and more.
  • The AICPA offers retirement programs.
  • Find a CPA/PFS (Personal Financial Specialist), AICPA-accredited financial planner, by calling (888) 999-9256.

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Create a retirement checklist
A comfortable and secure retirement takes years of planning and saving. Your efforts today, whatever your age, can help you look forward to financial security and more enjoyable retirement years. Use this checklist as a tool to help you plan for your future.

Have you prepared an inventory of your assets?
Have you prepared an estimated retirement budget?
Have you met with a financial planning professional?
Have you met with an attorney to develop a will and estate plan?
Have you reviewed your insurance coverage?

  Health insurance?


  Life insurance?

  Long Term Care?

  Medicare supplement?

  Professional liability?

Do you have a retirement program through your employer?
If self-employed, have you set up a retirement plan for yourself?
Are you satisfied that your investments and retirement savings are in the best return vehicles for your needs?
Can you count on spouse income supplementing your retirement benefits?
Does your spouse have a retirement package as well?
Have you planned for retirement activities?
Have you done all you can to maintain your health?

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This narrative is provided to point out some of the issues and concerns associated with life events, and it is not intended to be representative of all of the issues or concerns possibly confronting individuals dealing with such experiences. Any individuals wanting or needing additional information should contact the appropriate professional, whether an attorney, a financial planner, a retirement planner, etc., to receive such information and guidance.

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