This Retirement Planning Move Puts You Ahead Of The Average Retiree

While having a robust portfolio is an excellent way to prepare for retirement, proper planning is equally vital. It's so important that the plans you make even six months before retirement could still play a major role in how comfortable the rest of your golden years turn out. However, many people who are getting ready to leave the workforce care more about growing their portfolio than planning where the money will go. According to the Federal Reserve, 78% of adults 65 and older have some form of retirement accounts or traditional pensions. That said, 56% of U.S. adults have no estate planning set up whatsoever, per Trust & Will.

Estate planning is the process of deciding what should happen to your property, finances, dependents, healthcare decisions, and personal affairs if you die or become incapacitated, and then creating the legal and practical arrangements needed to make those wishes work. These include, but are not limited to, power of attorney documents, trusts, and wills. It's essentially a comprehensive guideline for managing your wealth and medical treatments when you're unable to do so yourself.

Bank of America Private Bank's 2024 Study of Wealthy Americans surveyed 1,007 people with at least $3 million in investable assets and found that among the survey's "older wealthy" respondents, 54% had three basic estate-planning documents: a will, a living will or an advance healthcare directive, and a durable power of attorney. As such, having your own estate plan will not only place you among retirees with strong financial literacy, but it will also put you ahead of the average retired individual — all while making life easier for your family.

If you don't have an estate plan yet, your next worry might be how much you'll have to withdraw from your portfolio to prepare one. Luckily, there's plenty of room for different budgets. Assuming a basic estate plan includes a will, a living trust, and an advance healthcare plan, the National Council on Aging (NCOA) says these services start at $15, $1,000, and $200, respectively, for a minimum total of $1,215. You can prepare some of these documents by yourself or with minimal assistance; you don't need a lawyer to write a will, for instance. That said, a full estate plan with a power of attorney will likely start around $2,000, according to the NCOA. With the median net worth of householders aged 65 to 74 at $409,900, per the Federal Reserve 2022 Survey of Consumer Finances, that shouldn't be an insurmountable sum for most retirees.

That said, doing it cheap doesn't mean doing it well. Prices for estate planning can go up considerably depending on various factors, including your location, how comprehensive your plan is, whether you're working with an attorney or doing it yourself, and how complex the estate is. Hiring an attorney will cost more, but it helps ensure that there's no missing paperwork, which could cost you and your family more money down the line. Complex estate plans could cost well over $5,000. If you're not familiar with your state's law but hope to save as much as possible on an estate plan, the best move might be to do what you can yourself, then pay a lawyer to review it.