As you transition into retirement, it’s a good idea to adopt strategies that help protect you from significant financial losses in your later years due to mistakes, financial exploitation from unethical friends and relatives, and fraud.
The recently released “Thinking Ahead Roadmap” helps you select a financial advocate who can assist you in managing your money and property at a time in your life when you might need help.
As part of your retirement income planning, you should take actions that can protect your retirement savings and sources of retirement income against losses later in your life. Let’s look at five steps that can help provide this protection.
Step 1: Use your retirement savings to fund a Social Security bridge strategy. Doing so can significantly increase the amount of Social Security income you’ll receive over your lifetime by enabling you to delay the start of your benefits as long as you can (though there’s no advantage to delaying later than age 70). A Social Security bridge strategy also helps fortify your retirement income by converting easily accessible savings—a target for fraudsters—into a stream of monthly income that’s guaranteed by the federal government.
Step 2: Consider leaving your retirement savings in employer-sponsored plans, such as 401(k) plans, when you retire. These plans are managed by fiduciaries, who are required by law to act in your best interests. The same standards aren’t required for other investment accounts, such as IRAs located at banks, insurance companies, or brokerage firms. If you decide to move your retirement accounts from employer-sponsored savings plans, look for financial advisors or institutions that typically agree to act in your best interests.
Step 3: Choose a guaranteed monthly pension payment if you participate in a traditional pension plan or cash balance plan. By doing so, you can often receive more retirement income over your lifetime, even if your plan offers a lump sum cash-out of your earned monthly pension benefits. This not only provides a guaranteed stream of monthly income, but it helps protects you from fraud, exploitation, and investment mistakes.
Step 4: Find out how your financial institution can help. Financial institutions often offer ways to protect your savings from financial exploitation, identity theft, and other types of loss. Here are some examples:
- Alerts. You could set an alert on a bank account so you get notified when a transaction over a specified dollar amount occurs or when money is transferred beyond a specific geographic area.
- Account lockdowns for investment accounts. With such a lockdown, you pre-approve the only authorized withdrawals that can be made from your account. A typical example is a periodic electronic transfer from your investment to your checking account. If anyone wants to change these withdrawals, the financial institution makes them go through additional security steps.
- Account monitoring with third-party alerts. There are services that permit trusted third parties to receive alerts when a transaction appears suspicious. This allows you the opportunity to appoint a trusted individual to help monitor your accounts.
Step 5: Consider using some of your retirement savings to buy an annuity that will generate guaranteed monthly income. An annuity can provide a stream of monthly retirement income that lasts the rest of your life. Annuities typically protect you from investment losses resulting from mistakes or a plunge in the stock market. With most annuities, it’s difficult or even impossible to withdraw all your money at once; this feature protects you against catastrophic losses by preventing you from withdrawing all your money at one time. A note of caution: Buying an annuity may be a confusing process, and some annuities have high fees. To make things easier, shop around to find a cost-effective annuity or work with a professional who has your best interests at heart and can help you make the right choice.
Protecting your precious retirement assets and income from financial losses due to mistakes, exploitation, and fraud is an important consideration that’s often overlooked when planning for retirement. But you’ll enjoy your retirement more if you craft a retirement income strategy that addresses all the risks you face.