Essential Planning Steps for Pre-Retirees

By Derek D. Villars, CLU®, CASL®, ChFC® 

The years leading up to retirement are often focused on financial planning tasks like optimizing your 401(k) contributions, paying off the mortgage, and determining a safe withdrawal rate. But while you’re calculating how much you need to live on, it’s equally important to finalize how your assets are managed and distributed when you’re no longer here. For pre-retirees, that means focusing on estate planning now.

Why Estate Planning Matters Before Retirement

As a pre-retiree, your net worth is likely at its lifetime peak. Your financial life is often more complex than ever, encompassing multiple investment accounts, real estate holdings, and various life insurance policies. Without a comprehensive estate planning strategy, all that hard-earned wealth and its intended destination can be thrown into disarray.

If you die without a plan, state intestacy laws dictate who receives your assets. This process can be long, expensive, and may result in assets going to unintended heirs. 

Finalizing your estate documents while you are healthy, mentally sharp, and have the time to make deliberate choices verifies that your wishes are followed.

Core Estate Planning Documents

The foundation of any solid estate planning strategy rests on a few core documents:

• Last will and testament: This document dictates how your property is distributed upon your death and names a personal representative (executor) to manage your estate. If you have minor children, the will is where you name their guardian.
• Revocable living trust (RLT): While a will distributes assets, a trust holds them. An RLT is a popular tool for pre-retirees because it allows assets to bypass the costly and public probate process. 
• Durable power of attorney (POA): This document appoints someone to manage your finances if you become incapacitated. This is a vital strategy that allows your appointed agent to pay bills, manage investments, and handle taxes without court intervention.
• Healthcare directive (or living will): This document articulates your wishes regarding end-of-life medical treatment and names a healthcare proxy (or agent) to make medical decisions for you if you cannot communicate them yourself.

Beneficiary Designations 

While core documents are essential, the destination of a significant portion of your wealth is governed by beneficiary designations, not your will. These designations supersede anything written in your will.

A common oversight in estate planning is failing to update these forms. If you name your estate as the beneficiary, those assets are subject to probate and may lose tax advantages. When you partner with a financial advisor, they confirm that your beneficiaries are correct and they are structured for optimal tax efficiency. 

Estate and Inheritance Taxes

For most pre-retirees, federal estate taxes are not a concern due to high exemptions. However, estate planning must address state-level taxes. Some states have their own estate taxes or inheritance taxes.  

A proactive advisor can utilize strategies like portability (for married couples) or irrevocable trusts to help lessen the tax bite.

Long-Term Care Planning: An Essential Pre-Retirement Step

One of the largest financial risks to a retiree’s estate is the cost of long-term care. Since Medicare does not cover extended nursing home stays, the cost can quickly deplete a lifetime of savings.

As part of comprehensive estate planning, pre-retirees should evaluate their options for mitigating this risk. This may involve purchasing a hybrid life insurance/long-term care policy, self-insuring with a dedicated pool of assets, or using certain types of trusts designed to safeguard assets.

Digital Estate Planning

The modern digital footprint adds a new layer of complexity to estate planning. Without instructions, your executor may not be able to locate or access these valuable or sentimental assets.

Your estate planning checklist should include a detailed inventory of digital assets along with explicit instructions for how they should be accessed and handled.

Regular Reviews and Updates

The most well-designed estate plan can become obsolete the moment a major life event occurs. The intricacy of your final working years means more life changes are likely to happen. These changes mandate periodic updates to your estate planning documents.

Review all of your estate planning documents every three to five years, or immediately following any major life event, to verify your plan still reflects your current wishes and is compliant with any changes in state or federal law.

Focus on Estate Planning Now

A robust estate planning strategy is an essential step in transitioning into retirement. Addressing your core documents, updating beneficiary forms, and proactively planning for issues like long-term care and digital assets provides a clear, efficient, and tax-advantaged road map for your legacy. 

Don’t leave this critical step for your retirement years. Act now to confirm your wishes can be carried out exactly as you intend.

The team at Boulevard Wealth Management helps you plan with purpose so you can face the future with peace, confidence and excitement. To start a conversation, call Derek directly at (763) 244-1132 or email derek@blvdwealth.com.

About Derek

Derek Villars, CLU®, CASL®, ChFC® is the Director of Risk Management at Boulevard Wealth Management, a Bloomington-based financial services firm dedicated to addressing client goals through a team-based, fiduciary approach. With over 22 years of experience in the financial industry, Derek specializes in advanced insurance and financial strategies designed to help clients grow, preserve, and distribute their wealth effectively. His proficiency includes estate planning, business owner benefits, business succession strategies, tax-advantaged retirement planning, and comprehensive insurance performance audits. Derek is known for his focus on security, risk mitigation, and delivering after-tax, risk-adjusted returns, helping clients experience financial peace and confidence.

A graduate of St. Cloud State University, Derek has earned the Chartered Life Underwriter®, Chartered Financial Consultant®, and Chartered Advisor for Senior Living® professional designations. He works closely with pre-retirees, business owners, and individuals with complex financial needs, providing personalized guidance and solutions. Outside of his professional life, Derek is an avid car enthusiast who enjoys smoking meats, charity road rallies, racing, auto restoration, and trips with family and friends. To learn more about Derek, connect with him on LinkedIn.