Asking, “What if?” may help prevent, “If only I’d have known.”

“You don’t know what you don’t know.” That’s the sentiment of many when it comes to unknown retirement risks. However, there is a way to help overcome this conundrum – simply ask, “What if?” If more people added this simple question to their financial planning repertoire, there’s a chance they may not find themselves saying later, “If only I’d have known ...”

The “what if?” of health

Like an elephant in the room, the first “what if?” is quite obvious: “What if I develop health issues?” This not only involves medical expenses but long-term care costs, too.

Remarkably, healthcare costs are often underestimated in retirement planning. But remember, many retirement dreams have faded due to runaway healthcare costs.

One reason is many people think Medicare will fully cover them, but it won’t. Today, Medicare only covers about 60% of retirees’ medical costs*. That leaves 40% that must be covered by supplemental insurance, bringing with it additional premiums, copayments, deductibles and out-of-pocket expenses.

Other startling healthcare-in-retirement statistics come from studies suggesting one-third of people who turned 65 in 2010 will require at least three months of nursing home care: 24% for more than a year; 9% for more than five years. But Medicare does not cover long-term care

That’s why many turn to long-term care insurance to help manage this unanticipated expense by covering a range of nursing, social and rehabilitative services.

The “what if?” of disability

Another “what if?” we need to ask is: “What if I become disabled?” Disability can vary by form and degree. If you become disabled before you complete your retirement plan, it can have far-reaching consequences.

For instance, if you’re the sole income earner, disability can curtail, if not derail, future plans. Even if you’re not the sole breadwinner, it can lengthen the time it takes to fully fund your plan. And depending on the severity of the disability, from temporary to permanent, rehabilitative care may require additional funds above those provided through Medicare or health insurance.

Disability after retirement also has implications regarding unforeseen costs for care. And if you choose to work while in retirement to supplement income – as part of your retirement plan –that income can be lost temporarily or permanently due to disability.

How you choose to protect yourself from disability is up to you and your advisor. You may have a disability plan through your current employer, which is optimal for pre-retirement years. If you don’t, your advisor may suggest adding premiums for a disability policy into your pre-retirement saving or retirement spending plan.

The “what if?” of unexpected loss

Now we come to what is likely the most sobering “what if?” of all: “What if my spouse dies unexpectedly?” Conversely, “What if I die unexpectedly?”

Along with personal loss comes the risk of financial loss. To help, life insurance can ensure those left behind are not burdened with significant debt and immediate expenses, like funeral costs. Life insurance can also ensure the completion of a financial plan for the spouse left behind, cover estate taxes, and infuse cash into a business to cover the loss of a key employee. Remember, there are many forms of life insurance; your advisor can help determine which is right for your situation.

This certainly does not cover every “what if?” that can affect your financial plan. But by talking to your advisor, you may uncover the particular “what if?” risk that can harm your plan and take positive steps to alleviate it.

The decumulation equation

After years of saving, will you be ready to spend?

In financial terms, retirement day might be the single most important day of your life. Few other moments are as painstakingly planned for or as eagerly anticipated. You’ve probably already spent years preparing for the day you’ll retire – saving and strategizing so that when it finally arrives you’ll be ready to enjoy the fruits of a successful career.

But how often during all your hard work and preparation have you thought about the other side of retirement? The side where wisely spending replaces saving as your primary goal. The side where you’ll need to balance maintaining your lifestyle with preserving your funds. The side where accumulation gives way to its counterpart, “decumulation” – the distribution of your retirement savings.

Here is a brief look at that other side of retirement – how your priorities will change in the days after one of the most important days of your life, and how cash and managing it well will become vital.

Savings to spending

Spending might seem like the easy part, but in retirement, spending takes on new significance. You’ll be working with finite resources, ones that you’ll need to use sensibly and strategically in order to reach your goals – from taking dream vacations to buying a vacation home – without exhausting the funds you’ll need to sustain yourself long term.

Even after you’ve officially retired, you’ll still need a steady paycheck. And with no employer or business to supply it, delivering consistent income is up to you. So in addition to using your savings for big-ticket items, you’ll also be using it to cover day-to-day needs and unexpected expenses. Creating and maintaining a steady flow of cash, and budgeting to determine how much you’ll need each month, is key.

Well, before you retire, you’ll want to begin mapping out your retirement spending – or “decumulation” – strategy. Through this process, you’ll consider your long-term needs in relation to your retirement goals, project how much you’ll need to enjoy the lifestyle you want, and develop a plan for converting your investments (by way of bonds, certificates of deposit, money market accounts, etc.) into the cash you’ll use to fund that lifestyle. This will also be an opportunity to determine whether your expectations are reasonable, what concessions you might be willing to make, or how you can restructure your saving efforts for maximum impact.

Making the most of other resources

As important as your savings will be in funding your retirement, your 401(k) or other employer-sponsored account won’t be the only resources you’ll have. Your cash flow can be supplemented by things like pensions, individual retirement accounts (IRAs), the sale of a home, inheritance and, of course, Social Security.

While today’s Social Security retirement benefit certainly can’t be relied on to cover all – or perhaps even most – of your expenses in retirement, it remains a valuable source of income. And there are ways to maximize it.

First, you’ll want to ensure you’re getting the maximum payment. For instance, you may be able to claim a deceased or former spouse’s benefit if it is higher than your own (Work with your advisor to explore the rules and your options.).

You can also take advantage of direct deposit – having your Social Security benefit deposited into a checking account or even into an interest-bearing account. This option offers you greater security than you’d have with paper checks and, in most cases, incurs no additional fees.

Coordinating it all

In addition to maximizing each of your resources separately, you’ll also want to consider them as parts of a larger whole – to see where one could be used more effectively and another might provide extra cushion.

To help you do this, you might consider consolidating your cash and checking accounts into a single cash management account through your bank or through your financial advisor. This can allow you and your professional team to keep track of all your financial moving parts in one place, and can enable you to more easily manage your cash flow, better preserve your funds and simplify your financial life.

However near or far off retirement might be for you, remember that it has two sides – and that how well you spend can be just as important as how well you save.

To learn more about how to develop a retirement spending plan and to effectively manage your cash in retirement, be sure to talk to your financial advisor.

Investing – Build a foundation with the basics

Whether you’re green or seasoned, when it comes to investing, the basics still apply

Look at any sport and you’ll find that the basics apply to both professionals and beginners. You’ll also find the same holds true when it comes to investing – there are sound fundamental principles that apply to everyone. So, whether you’re a seasoned investor or new to the market, these principles provide a firm foundation for growth in the financial marketplace.

Risk tolerance & asset allocation

Determining what mix of assets you’ll hold in your portfolio is based on two factors: time horizon – how long you will invest to achieve your financial goal – and risk tolerance – your ability and willingness to lose some or all your principle. If you have many years until retirement – a longer time horizon – you may take on riskier investments. But if you’re close to retirement – a shorter time horizon – you would likely take on less risk.

Select investment vehicles

There are as many investments from which to choose as there are reasons to choose them. They include stocks and stock mutual funds, corporate and municipal bonds, bond mutual funds, lifecycle funds, exchange-traded funds, money market funds and U.S. Treasury securities. Depending on your financial goals and the asset allocation you’ve determined, specific investments like stocks, bonds and cash – the three major asset categories – can be a good strategy.

Choose good, quality investments

To choose an equity or stock, your advisor will look at factors like fundamental analysis – based on what the business is actually worth – and qualitative analysis of a company. High-quality bonds include those issued by the U.S. Treasury and other government agencies as well as select corporations. Municipal bonds are also attractive to investors because their interest is exempt from federal – and sometimes local – taxes.

Reinvest dividends

By engaging in this practice, your dividends will continue to grow because after each dividend payout you’ll have more shares, and if your stock consistently raises its dividend, your dividends will grow with your number of shares.

The importance of adding risk

In the long run, investments like bonds and cash cannot protect you from the risk of inflation. But by purchasing riskier investments you can potentially hedge against losing the purchasing power of your assets. Over time, a portfolio of all safe investments may eventually be too risky for protection against inflation.

Have a plan and stick to it

Having a plan to follow, based on the above, can help you stay focused on your goals. Meeting regularly with your advisor will enable you to make adjustments based on market activity, the economy and personal circumstances. Remember, your advisor is always available to help you make investment choices that are right for you and your plan.

Asset allocation does not guarantee a profit nor protect against loss. Dividends are not guaranteed and will fluctuate.

Planning Tip: Political contributions – know your limits

It’s an election year, when some of us think of making political contributions. As an individual donor, do you know your contribution limits? Here are the 2011 - 2012 individual limits as designated by the Federal Elections Commission:

• To each candidate or candidate committee per election – $2,500
• To national party committee per calendar year – $30,800
• To state, district & local party committee per calendar year – $10,000 (combined limit)
• To any other political committee per calendar year¹ – $5,000
• Special Limits – $117,000 overall biennial limit: $46,200 to all candidates $70,800 to all PACs and parties²

If you’re wondering if these contributions are tax deductible, the short answer is, “no.” You can’t deduct any money paid directly or indirectly to a political party or candidate, nationally or locally, or to any committee, association, or organization whose purpose is to influence the election of any individual to public office (PACs included).

Always consult with a qualified tax planner before making any contribution you may think is tax deductible.