Summary

New Years is always a great time to prioritize the things that are most important in our lives, not just the “urgent” things that will always distract us. As Stephen Covey says, “Most of us spend too much time on what is urgent and not enough time on what is important.” As you age, and either contemplate retirement or are actually retired, financial planning is one of the important tasks you need to continually address.

Here are 6 “important” steps to get your retirement investments and plans in order for 2015:

1. Take responsibility, become active, plan and manage your investments.
2. Develop or update a written financial plan.
3. Learn how to choose and analyze investments like a professional.
4. Take action with your investments, set up rules for adding and eliminating.
5. Set-up or revise your “In Case of Emergency” document.
6. Determine if you need a Revocable Living Trust.

Take Responsibility.

The finances that you and your family will live on once you leave the workforce won’t just automatically fall into place; you need to make it happen. Your retirement is your responsibility, you need to take charge. You need to become a “Vice President of Financial Responsibility”. Many older workers just don’t feel comfortable or may not have the skills to plan and manage their retirement. This however is their responsibility and they either need to develop the skills or get someone they implicitly trust to help them. The internet, including most brokerage sites like Fidelity, have tools and educational materials to also provide help.

Written Plan.

Almost everyone I speak to about retirement planning and investing claim they have a “plan”, very few can honestly say they have a written plan. A written plan can help take you from concepts to an actual roadmap. The plan should include a written description of your current situation, your short and longer term plans, tax planning strategies and investment goals. In addition to the written descriptions it should also include annual goals for income to be generated, living costs, emergency funds and yearend portfolio values. If you just have a spreadsheet and no written document, you don’t have a plan.

Analyze Like a Professional.

You don’t need to be a day-trader or professional advisor to use the basic analytical tools to help choose and manage your investments. When I trade in my professional account I might look at a 60 and 5 minute stock chart, RSI and MACD indicators and “futures” charts. However when I review my retirement investments I’m looking at completely different set of metric’s. Why? Because my goals and time horizons are different. In a future blog posting I’ll give you the tools I use for managing the stocks and bonds in my retirement accounts.

Take Action.

One of the biggest mistakes people make in their investments is to “Buy and Forget”, see my story on this here. Most people know how to buy but don’t know how or when to sell or rebalance. You need to set up rules that will help you decide how to manage your investments. The poor people that couldn’t endure the pain anymore and decided to sell their key holdings in March 2009, and then sat in cash for the next few years as the market completely rebounded.  Those that stayed with blue-chips did well, those in cash will never again recover their losses.

“In Case of Emergency” Document

Everyone who is married or has any assets whatsoever needs to have a “In Case of Emergency” document.  Check here for a detailed list of what should be in your document and how to manage it.

Revocable Living Trust

Why would you need a Trust, the new federal estate tax exclusion has been raised to $5,340,000 per person and twice that much for a married couple. Most people don’t have assets that exceed these amounts. Maybe you should just have a simple will. The issue isn’t about federal estate taxes, it about the other benefits of a trust. Here are some reasons to consider a Revocable Living Trust:

1. Protection for or from your beneficiaries and their creditors. Do you have a 20-30 year old “child”, should they just be given the money outright, might hey spend it foolishly?
2. Control of your wealth beyond just a will. How should the money be distributed and when. What can it be used for?
3. Keep your privacy and money out of state probate court and avoid the high cost of probate. In general most states require a will to be implemented through the probate process and can include some substantial fees, along with being public. A Revocable Living Trust does not need to go through the probate process.
4. Manage or avoid state estate taxes. 20 states currently have various forms of estate taxes and a Revocable Living Trust may help you batter manage or even avoid these extra costs.
5. Always seek the help of a qualified attorney who specializes in Estate Planning and Tax law to help you determine if a trust is right for you.