If you are planning for your future, there are two types of planning that will need to be top-of-mind to ensure that all areas of your life are protected: retirement planning and estate planning. While it is likely that the first form of planning that comes to mind when planning for your future is retirement planning, estate planning is equally as important. In fact, the two are interlinked with one another. Although it can be challenging to discuss your estate plan, and emotional to plan ahead for your passing, it is important to discuss important matters now while you still have a chance. With an estate plan and a retirement plan working together, you can safeguard your future and your assets and prepare for unforeseen circumstances that may arise. We cannot know that future, but with Trust & Will, we can plan for it.
Trust & Will, the leader in online estate planning services, wants to ensure that you are ready for any situation life may throw at you. That is why in this article we will be covering what retirement planning is, what estate planning is, why they are both important, and how they work together to protect your future and your loved ones.
To learn the answers to the following questions regarding retirement planning and estate planning, keep reading:
What is retirement planning?
Retirement planning is as the name suggests: planning that is specifically focused on your retirement. In retirement planning, you take a look at your finances and what you can begin doing now to plan for your retirement and ensure you will have adequate funds to maintain the lifestyle you want. Everyone’s retirement plan will look different, as everyone’s lifestyle expectations will also be different. For example, someone who plans to do significant traveling after their retirement may need to save more now for their retirement than someone who does not.
Retirement planning is also a specialized form of financial planning that not only looks at how much you need to save for your retirement, but also how you can use that money you are saving to continue to create more wealth for your future. For example, this type of planning looks at how you can begin investing money now to continue generating wealth. Due to the nature of retirement planning, it is also a much more long-term form of planning.
What is estate planning?
While retirement planning focuses on your future while you are still alive, estate planning focuses on future planning for when you pass away. In estate planning, we begin to create a plan on how to pass on your assets to your loved ones, including things like cars, jewelry, houses, and finances.
When you think of estate planning, it is likely that the first thing that comes to mind is creating your Will. While this is an important part of your estate plan, it is only one element of a comprehensive estate plan. Depending on your specific needs and assets, your estate plan may also include a Trust as a means of passing on your assets to your beneficiaries.
Additionally, your comprehensive estate plan will also include important documents such as your Financial Power of Attorney and your Health Care Proxy. These are both important documents that help protect you if you end up in a situation where you can no longer make decisions for yourself, such as when you are in a coma or develop Alzheimer’s disease. Your Financial Power of Attorney will allow you to choose an individual to handle your finances in your place, and your Health Care Proxy will allow you to choose someone to handle your healthcare related decisions.
This is just a brief overview of the many elements of a comprehensive estate plan. To learn more about estate planning, read our "What is Estate Planning" article where we go more in depth.
How do they work together?
While your retirement plan works to protect your future, you also need a plan set in place to protect your retirement plan. While this may seem odd, protecting your retirement plan by creating your estate plan has many benefits. The biggest benefit is that your estate plan will allow you to ensure that even if you do not get to see the full benefits of your retirement planning, your loved ones will, as you can put the assets from your retirement plan into your estate plan, including your 401k, investments, and more.
Additionally, creating a comprehensive estate plan will allow you to name a Financial Power of Attorney who can ensure your retirement plan is followed to your wishes even if you are not of sound mind to do so yourself. This means they will be able to continue managing your investments so that you not only have sufficient funds to pay for your medical care, but will also have assets left to pass on to your family as specified in your Will. Without an estate plan, you may be leaving your retirement plan and assets at risk.
How do I get started?
To start building out your retirement plan, you will want to work with your financial advisor and do your research to create the plan that is best for you and your lifestyle. At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning options today!
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