Six Financial Planning Considerations for Leaders Nearing Retirement


An working woman thinkingMany university executives and senior faculty members will retire within the next 10 years. If you are among them, deciding when to retire may involve a difficult mix of emotions associated with leaving colleagues and your chosen profession. Such emotions may make it all too easy to delay making a decision. But the prudent course is to start your retirement planning process months — or even better, a year or more — in advance of your retirement date. This will give you the time you need to prioritize and make smart decisions in a methodical, well-reasoned way.

Like most senior college and university academic and administrative officers who have been employed at more than one institution over the course of their careers, you may have accumulated assets within retirement plans with both current and former institutions. In addition, participation on outside boards may provide ongoing income streams that need to be considered. It may take time and expert counsel for you to fully understand the differences in plan rules and evaluate the array of possible retirement income strategies and the resulting income tax implications. Here are six financial planning issues to consider as you near retirement.

1. Determine Your Retirement Income Needs
Projecting monthly income in retirement can be a challenge. Determining when and how to take Social Security income or distributions from retirement accounts is not as simple as it once was, especially with life expectancies on the rise. The first step is to perform a basic retirement needs analysis. Use the following guide as a starting point.  Remember that your sources and uses of income will likely change from time to time during your retirement years.  As you prepare this analysis, consider how these changes will affect your projected surplus or gap from year to year.  Doing so will also allow you to consider how those changes affect your annual savings rate or the withdrawals you make from investment assets during your retirement years.

Projected Income MINUS
Projected Fixed Expenses


Projected Discretionary Expenses EQUALS
Projected Surplus or Gap
  • Social Security
  • Pension and/or annuity payments
  • Retirement plan and IRA distributions
  • Interest and dividend payouts
  • Rental income
  • Other: royalties, consulting fees
  • Food
  • Mortgage, housing, other installments
  • Utilities, gas, transportation
  • Insurance
  • Healthcare
  • Taxes
  • Other
  • Dining out, entertainment
  • Travel, recreation
  • Gifting, charity
  • Other

2. Determine Your Retirement Income Strategy
Once you have estimated your retirement surplus or gap and evaluated how that surplus or gap may change over time, you can begin to think about a course of action. If you expect a surplus, you can focus more on wealth management considerations and less on meeting your lifestyle needs. On the other hand, if you foresee a shortfall in your projected retirement income versus expenses, you’ll need to determine how to fill the gap — perhaps by working for a longer period of time, consulting or starting an income-generating business in retirement, delaying Social Security payments, or reducing expenses.

3. Implement Your Retirement Income Strategy
Deciding how best to distribute your assets requires a careful look at your overall financial condition, your health and longevity expectations, and your risk tolerance. It’s important to consult experts in retirement planning, taxes and law to help you identify gaps in your financial plan and help you create an appropriate strategy to address those gaps.

4. Evaluate Your Insurance Coverage
As you prepare for the financial changes of retirement, it’s a good time to work with an insurance specialist to help evaluate the strength of your existing policies and to explore how insurance fits into your longer-term plans.

You might be able to save money on health insurance by increasing deductibles or switching policy types. For example, consider purchasing a supplemental policy for healthcare or prescription drug coverage until Medicare kicks in. Next, assess your life insurance needs to determine whether you need to modify coverage in order to increase your estate’s liquidity, provide for loved ones, or serve as a vehicle for tax-deferred build-up of cash value.

5. Plan for Incapacity or Death
Estate planning is an important part of your financial plan. The contractual provisions of your retirement accounts are as important as your will or trust. If you become incapacitated, your loved ones do not have an automatic right to make plan decisions on your behalf. You should consider formally appointing someone to act as your agent under a durable power of attorney so they can make investment decisions or withdrawals for you. It is also important that your retirement plan, IRA and life insurance beneficiary designation forms be precisely coordinated with your will or trust provisions, otherwise, the assets might be distributed in a manner that is contrary to your wishes.

6. Monitor Your Progress
Review your plan regularly — at least once a year. As your financial situation and income needs change, you may need to adjust your goals, reassess your risk tolerance, rebalance your assets, or modify your strategy.

Properly preparing for retirement after a long academic career requires adjusting both your mindset and your portfolio. Working with your estate planning attorney and advisor or wealth manager, give yourself plenty of time to make the best decisions for your situation. Planning ahead will allow you to take advantage of the most planning options while increasing your peace of mind.

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