Ways for Soon-To-Be Retirees to Protect and Preserve Their Assets

If you're in the 62 to 65 year old range, you're getting ready to retire. And you have a remaining life expectancy that's statistically about 20 years or more - still a long way to go. Be sure to prepare to preserve your assets for the long haul. Here are a few things to work on. You can take steps to better protect and preserve your assets for you and yours in three areas. These are:

* Insurance,
* Investments, and
* Retirement Income

-Stay insured while you're still vulnerable

Problems associated with your house, health and future long term care can put a significant portion of your assets in jeopardy.

Even though you may have paid off your mortgage, keep your home insurance up-to-date in order to cover its current replacement cost; it generally keeps rising in value. If you don't, then a fire that can rob you of a large portion of your home's value - especially after so many years of rising house prices.

Because Medicare doesn't start until you reach 65, try to maintain your health insurance in case you encounter a serious health problem and hospital stay if you retire early.

Long term care is not covered by Medicare. Medicaid will cover it but it's a program only for the poor. To qualify for Medicaid long term care, you must first spend down your own assets to 'impoverished' levels only below which you'll qualify. And those assets you give away to impoverish yourself must be out of your possession for up to 5 years before applying. So, consider buying long term care insurance now and make plans for how you'll dispose of your assets well in advance if you intend on applying for Medicaid.

-Protect your investments from inflation's effect

During your retirement assure that your investments are there to contribute to your retirement income. That generally means maintaining a conservative portfolio often based on income-based investments. But such investments don't generally protect you very well from inflation's effect.

Because just a 3.5% annual inflation rate will halve the value a dollar's purchasing power over 20 years, try to keep about 25% of your portfolio in equity investments that tend to preserve their value against inflation.

-Protect your retirement income from unnecessary tax losses

Retirement income generally comes from Social Security benefits, a company pension and investments. Because Social Security income is tax free below a threshold income, try to keep your income below that threshold level.

Taxable income includes your pension and money you pull out of any government retirement plan, like a 401(k) or IRA plan - not Roth plans, though. And you're obligated to make minimum required withdrawals from them to when you reach 701/2. So what should you do?

Plan to take only the minimum required distributions from your government plan investments. Then take the remainder of what you need from the others investments to help minimize losses to taxation. That'll help keep your taxable income lower but still keep your government retirement plan investments growing tax-deferred.

Shane Flait helps you with your financial legal, tax, and retirement goals.
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