Being able to protect your assets in retirement will be important. You want to do what you can to prevent losses in the event of a downswing in markets or even personal insolvency.
If you lived through the Great Recession of 2008, you know that having your nest egg wiped out to the tune of 40%, 50%, or 60% is not any fun. It can directly hinder your ability to enjoy a high standard of living in retirement.
While investing and even asset accumulation are, by nature, activities more prone to risk, there are still some strategies and tools you can put in place to help protect your assets in retirement.
The most well-known strategy to protect assets is diversification. In other words, don’t put all your eggs in one basket. If you are overly exposed to a certain asset class, a bubble or market hiccup could cause major losses.
A good idea would be to own assets and different categories. Stocks, bonds, real estate, precious metals, and business holdings are all different types of assets that have values that don’t tend to fluctuate all at the same time. For example, if stocks are doing particularly well, the bond market may be slightly depressed while the converse is usually also true.
Being properly insured is another way to protect your assets in retirement. By the time you hit retirement age, assuming you’ve accumulated a significant amount of savings, you may be wondering how you’ll protect all the money you’ve amassed. As your net worth increases, you could be more prone to litigation and lawsuits.
This is a good time to talk with an insurance agent or estate lawyer to figure out what type of policy can protect you and the money that you’ve worked so hard to save.
If you are trending towards being especially wealthy, it’s a good time to engage an estate planning lawyer. You may consider putting your assets into a trust where they can be protected from creditors or other claimants. If you are a business owner, you should have your business holdings in an entity that protects your personal assets while ensuring them for your heirs.
Under federal laws, most tax-exempt retirement accounts cannot be taken to pay your creditors in bankruptcy. Make sure you maintain a certain amount of money in these accounts for safe keeping. We also recommend speaking to a financial advisor to assist with tax-exempt information and retirement accounts.
Because cash is king, especially during a time where you may not have the same ability to accumulate it as you could during your working career, it’s best to preserve as much as you can. You can do this by cutting out unnecessary expenses like debt.
Also, by getting rid of your creditors, you’ll lessen the likelihood of losing your assets in legal proceedings like bankruptcy.
You can’t lose what you don’t have. If you make giving a part of your money management plan, not only are you helping people or charitable causes that you care about, but you are also likely getting tax deductions that will help reduce your tax liability and save you money. Please consult a financial professional who can advise you on charitable donations and tax deductions.
A reverse mortgage is a financial product that allows you to use your home’s equity for regular monthly cash payments. If you find that it’s hard to meet your financial obligations in retirement, you could use this product to help.
Not only could a reverse mortgage provide you with extra income to pay your bills on time and as agreed, but it can help you preserve precious cash in your retirement accounts where it can grow to meet your financial needs.
If you want more information on this product, check out One Reverse Mortgage’s resource page to find out if a reverse mortgage could help protect your assets in retirement.
Aja McClanahan is a freelance writer and owner of www.principlesofincrease.com.