The “Hidden Balance Sheet” for retirees or pre-retirees is too often overlooked and sets up false expectations for the future. A balance sheet is made of assets and liabilities listed in two columns and the difference in the two is referred to as net worth. When you take the assets and subtract liabilities you arrive at your net worth, net worth can be positive or negative. Accounting 101, informs both business owners and individuals that income and expenses are the basis for a balance sheet. Assets on the balance sheet help produce income but if expenses are high then there is a drain on income and thus less addition to assets. Look at your major asset buckets like your home, IRA, Investments, Insurance, and rental properties and get clear on costs. How much is liability insurance and expenses associated with each asset? Did you know there are annuities without mortality and expense charges? Did you know many of the banks and brokerages do not disclose their fees in writing or it is contained in a large document and not easy to find? If you were overpaying for a service would you prefer to know now or later? Obviously the answer is now, the sooner the better so you can deal with it and take corrective actions. It is not uncommon for individuals or couples to think that money management is not costing them directly because they do not have to write a check. How does it matter to you if you reduce your expenses by 1/2 % on your investments? Example: Investments of$250,000 and the total expenses for advisor and management fees are 2% a year or $5,000. A reduction of just 1/2% adds more than $100 a month to your income. Think about what you could do with an extra $1200.00 per year. We are just suggesting for you to get a really clear accounting on the costs and expenses of investments you already have in place. Below is not an exhaustive list but rather a list of a few major overlooked items by those approaching retirement.
1) Understanding taxes and the strategies to capture up to maximum on lower bracket income.
2) Missing opportunities in Social Insurance: Medicare, Social Security claiming strategies (not what the person in the next cubical is doing) SEE BELOW
3) Capture money for healthcare before it creeps up on you, or selling or cashing in an old life insurance policy.
4) Seek out some nearly free offerings to help pay for medical costs, including Medicaid planning.
5) Review why you took out a life insurance policy and get clear on potential opportunities to reduce premiums or extend current coverage or increase coverage for no additional outlay.
It is not uncommon for a near retiree to express they want to increase their Social Security Retirement Benefits so they have decided to delay claiming until later age perhaps age 70. What we find is often there is money being left of the table and lost forever if they don’t not the rule so f the game. Guess what there are 2800+ rules at Social Security and the Social Security Administration is not equipped to help you plan. They are equipped to help you fill out the forms after you decide on what to do. Each month the Hidden Balance Sheet is ignored is another month of money leaking out or your financial house. Proper financial planning matters, retirement income planning matters, and getting clear on your current assets and liabilities all matter to your financial well being.