Retirees and Near-Retirees Need an Annual Financial Checkup

Retirement plan sponsors can remind participants to review their finances and provide resources for them to do so.

Retirees and those nearing retirement should revisit their finances every year, according to Kathleen Stewart, senior wealth strategist at BNY Mellon Wealth Management.

“This should include being prepared to address unforeseen events, such as the COVID-19 pandemic,” Stewart says. “Seniors and retirees can do this by using a total balance sheet approach. This means periodically reviewing their total balance sheet to consider all available funding solutions, including borrowing to avoid disrupting one’s long-term investment strategy and to avoid incurring capital gains taxes.”

Stewart also suggests that people who find themselves in a lower tax bracket prior to retiring should consider a Roth individual retirement account (IRA) conversion. “If their income is lower, and especially if IRA/qualified retirement assets are not needed to cover retirement expenses, it is appropriate to consider a Roth IRA conversion,” she says. “That can happen all at once or over the course of several years.”

Stewart says she approaches the annual financial review for retirees and near-retirees “from a broad perspective.” BNY Mellon suggests seniors and retirees focus on five areas, Stewart says: investments, spending, borrowing, managing for taxes and protecting assets.

“One of the things I stress is for retirees and near-retirees to look at their current goals, rather than assuming the entire time they are in retirement they will not work. It is possible that someone heading into retirement will leave their lifelong career in pursuit of a passion or to manage a new business.

“One of the other areas that is probably the most overlooked in retirement is failing to protect assets,” she continues. “Folks in retirement should have an estate plan and address who their beneficiaries are. They should pay attention to the titling of their assets to provide creditor protection. Maybe they should create a trust. They should also review their health care, long-term care and property and casualty insurance. There are legal documents that need to be reviewed. If they fail to do so, what would otherwise be a sound and successful retirement could be completely derailed.”