Easter has its origins in Europe from celebrating the goddess of spring, known as ?ostre. This goddess’s earthly symbol is the rabbit. For some, Easter is a religious celebration, while for others it has become a highly commercialized holiday that focuses on a rabbit who delivers Easter baskets to children.
Knowing that Easter is upon us, I began to think about the poor Easter Bunny who delivers all those Easter baskets. He’s obviously been on the job for decades, so he has to be coming up on retirement fairly soon. That being the case, you would hope that he has some kind of retirement plan set up, maybe a rabbit 401(k) or private pension. But whether he does or not, here are five things that he (and you) should definitely have in preparation for retirement.
First, every aging Easter Bunny has to start thinking about their longevity and how they will pay for their expenses in retirement. After all, one cannot deliver baskets forever. At some point, every rabbit will begin to lose the bounce in their hop. So first, the Easter bunny should be constructing a financial plan. This plan will show Mr. and Mrs. Cottontail where they are now, how long they will live, what kinds of assets and incomes they will have in retirement, as well as what they will need to spend in their postdelivery days. But remember, although it is important to construct a plan to see if they can retire, it is equally important to annually review that plan to ensure they stay on track.
Second, knowing that Peter Cottontail has been socking money away for many years, he’s probably had more of a growth-oriented portfolio. But as he gets closer to retirement, it’s time to start getting a little more conservative. Think about it. That poor little rabbit doesn’t want to have all of his eggs in one basket. And he definitely does not want to have a negative return in his first few years of retirement. That could devastate his portfolio and his ability to keep he and the missus comfortable in their golden years.
But remember, becoming more conservative does not necessarily mean putting all of those savings into bonds. As every smart rabbit knows, interest rates are at an all-time low and when they eventually go up, bond prices will go down. So, thinking about other types of “fixed income” investments that don’t include traditional long-term fixed coupon bonds will be a good idea. Using bank loan investments, short-term bond ETFs, individual short-term bonds and even a little bit of cash could help alleviate their frustrations in this difficult interest-rate cycle.
Third, he must be thinking about his health care plan. This could be one of his biggest expenses in retirement. Assuming that Easter Bunnies have the same health care plans as most Americans (which is a big assumption), he should consider taking Medicare Part A, and even Part B, right away (at age 65). However, he will have to review that in conjunction with what his employer (the Acme Easter Basket Delivery Company Inc.) is offering if he works after age 65.
He could also consider using a Medicare Part C (Advantage Plan) which combines the major medical, outpatient services and prescription drug plans in a number of different ways to suit the needs of different rabbits. No matter what his circumstance, he should review all of the Medicare plans. If he does not apply on time, he may be subject to a penalty that will last for the rest of his bunny retirement years.
Fourth, he must understand rules around his retirement investments. For example, his individual retirement accounts and 401(k)s have a minimum distribution requirement. This means that at age 70 1/2, he must begin taking an annual distribution for all of his retirement accounts. This is very important to remember. If he does not take out his required distribution, he could be penalized up to 50 percent of the amount he did not withdraw. By the way, that is the largest penalty the IRS assesses on any infraction. He and Mrs. Cottontail definitely want to get that one right.
Fifth, it is also time to think about what will happen to the missus should Peter Rabbit die early. Will she be able to take over his Social Security benefit? Should she plan on selling their beloved burrow? Will he apply for a survivor benefit plan from his private pension? It is very important that he think about how Mrs. Cottontail will be taken care of. Further, he should also be thinking about what will happen once both he and Mrs. Cottontail pass away.
What will happen to the rest of their assets? Will the government take a big portion through probate, income taxes or even estate taxes? Also, will their little bunny children, or “kits,” fight over who gets what? His best approach here would be to have a proper estate plan. This would entail meeting with a rabbit attorney to at least set up a will, powers of attorney and medical directives. He may also want that attorney to set up a trust, so that if one of his little bunny kids is a spendthrift, provisions can be put into the trust so that the money can be given out over a period of time, versus right away.
Obviously, this little rabbit couple has a lot of planning to do. And so do many Americans that are getting ready to retire. But remember, there is no better time to begin than now.
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5 Things the Easter Bunny Can Teach Us About Retirement originally appeared on usnews.com
