5 Tips to Prepare for Your
Retirement Exit Strategy

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As you approach retirement, dreams about new hobbies, travel, and seeing family more often are common. Yet planning for how you’ll maintain your lifestyle, pay for healthcare, and protect your financial wellbeing is just as important. Creating an exit strategy that accounts for all the financial changes of leaving your career or business can help simplify this process and allow you to focus on the joys of retirement. Here are five helpful tips for forming an exit strategy and preparing for a comfortable retirement.

1. Focus on retirement savings.

As of 2019, the average retirement savings per family in the United States totaled just $255,130. This amount falls considerably short of the funds required to maintain a comfortable lifestyle. Additionally, individuals without sufficient retirement savings will face difficult decisions about long-term care, housing, and more. Whether you are self-employed or work for an employer, saving as much as you can for retirement as early as possible minimizes these challenges.

Retirement savings are especially important for business owners, who won’t benefit from matching employer contributions. With regular contributions to retirement accounts, you can prepare for the future and avoid taking equity from your business to pay for personal expenses. These contributions can also reduce your tax burden and may even protect your personal assets from creditors in the event of bankruptcy.

2. Retire at the right time.

If the company you work for provides profit-sharing or matches contributions to retirement savings accounts, your exit strategy should take these dates into consideration. Scheduling your retirement after these funds are provided allows you to take advantage one last time before leaving the company.

The same strategy applies to paid leave. If your vacation, sick time, and other paid time off (PTO) expires at year-end, consider scheduling your retirement before the new year and cashing out the value of these accumulated hours.

3. Prepare for health insurance changes.

If you retire at 65, Medicare will take the place of your employer-provided health insurance coverage. However, enrollment in Medicare is not automatic for individuals who won’t receive Social Security benefits at least four months before turning 65. In this case, you will need to enroll to receive coverage.

If you plan to retire before 65, you will not be eligible for Medicare and must find an alternative source of health insurance. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows workers to retain employer-provided health coverage, but you will be responsible for the full premium. In some cases, purchasing individual insurance coverage or exploring options on the insurance marketplace will be more affordable.

While few employers offer post-retirement health insurance, you should consider this option if available. The cost-sharing required by these plans is often lower than for Medicare, although you must carefully review policy information to confirm this is the case.

4. Consider other insurance coverage adjustments.

Long-term care insurance is an important aspect of retirement planning for many people. This coverage ensures a higher standard of care than may be provided by self-pay or Medicaid when assisted living, in-home care, or a nursing home is required. If your employer provides long-term care insurance as part of your benefits package, the price of your policy will remain the same after retirement. However, you will become responsible for paying the full premium.

When employers provide life insurance, they may also offer voluntary group-sponsored coverage. It’s not always possible to retain this coverage after retirement, and the benefit of doing so is questionable. Premiums typically increase and/or coverage decreases, and you can likely find more affordable, comprehensive coverage independently. At the same time, such a policy may be chosen as a last resort if other coverage is unattainable and you’re concerned about providing for minor children, have kids attending college, or are still paying a mortgage.

5. Make important decisions regarding your business.

Self-employed individuals face unique retirement concerns, and their exit strategies must reflect this. If you wish to remain involved in some capacity, a management succession plan can help ease the transition as you step away and an heir or employee takes a greater role. Alternatively, if you plan to transfer ownership immediately, you’ll need to determine the structure of that transition to protect your assets and the future of the company.

For those seeking early retirement, a business can continue to provide income even after your role changes or you walk away entirely. Financing the sale of your business offers consistent payments in predictable amounts to supplement retirement savings. You might also consider staying on as an employee of the business or as a consultant, drawing a salary until you are ready to transition to retirement account funds.

Learn More about Retirement Planning and Your Exit Strategy

In addition to the steps above, finding the right retirement planning support is a critical part of your exit strategy. If you’re seeking retirement planning services in Bellaire, Texas, or the surrounding area, contact Park Place Financial today. Our team can help you clarify priorities, maximize your savings, and make your transition from professional life to retirement easy and hassle-free.


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