What is The Difference Between Estate Planning and Retirement Planning?
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What is The Difference Between Estate Planning and Retirement Planning?

What is the difference between Estate Planning and Retirement Planning? What are the objectives, timing, and components for both plans? In this article, we'll discuss the main differences between these two plans! Keep reading to learn more.

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Roman Blum was a legendary Staten Island real estate developer and Holocaust survivor who lived a successful life before he passed away at age 97 in 2012.. Blum amassed a net worth of around $40 million. But he left no Will and seemed not to have any heirs. You’ll never guess what happens in that scenario.  The state takes the money if there are no legal heirs!  For Blum, this was a catastrophe, since people started coming out of the woodwork claiming to be his heirs. For each person, lawyers were hired and the estate had to defend the claims, whittling away the amount of money the estate had left. In 2022, only half of the estate remained - which means that $20 million had been wasted on nothing but red tape.

Estate planning and retirement planning are two distinct but interconnected financial planning concepts. While they share some similarities, their primary objectives and focus areas differ. Blum’s situation can help us illustrate the difference between estate planning and retirement planning. The Polish immigrant obviously had a great retirement plan. He was able to take care of himself in great style until the end of his life. So what was the problem here? In Blum’s case, what he really needed was an estate plan.  Here's a breakdown of these two financial plans and their differences.

Objective of Estate Planning

The two most significant claims against Blum’s estate were from someone claiming to be related to his lost loves. In 1937, Blum married a woman named Ester Lajzerevna in Poland. She gave birth to a daughter named Hannah. Hannah had a daughter named Tatyana. Tatyana may or may not have had a son named Maxim Shimnyuk. This man claims that he is Blum’s great-grandson. Hannah and her daughter died years ago. 

Blum separated from his wife before the Nazis invaded Poland. He then met Helen Pietrucha and the two planned to marry. However, the Nazi invasion ended their hopes. The couple hid on her family’s farm until 1940 when the Russians deported the family to Siberia. Blum eventually spent five years in Nazi concentration camps. Unfortunately, he couldn’t find Pietrucha after the war and they did not reunite. Many years later he did find Pietrucha and they started a correspondence. She passed away in 1999. But now Pietrucha’s caregiver claims that Blum once sent a letter that included a handwritten will saying, “I give all my estate after my death to my beloved Helen ­Pietrucha.” Since the caregiver inherited Pietrucha’s estate, she now claims to be Blum’s heir as well. How convenient!

Estate planning involves organizing your assets and outlining how they will be distributed upon your death. The primary goal is to ensure that your wealth and property are distributed according to your wishes, minimizing taxes and legal complications. Estate planning is the process of figuring out what you want your legacy to be and making legal plans to carry it out. Blum didn’t do any estate planning unless the court ultimately rules that he wrote a valid handwritten Will, and I seriously doubt that will be the case. Maybe he was fine with the state taking his money. However, he obviously didn’t anticipate heirs from trying to claim part of his fortune. But with a little foresight, he would have been in a different situation and the estate would have been settled a decade ago.

Objective of Retirement Planning

Retirement planning, on the other hand, focuses on building financial security and ensuring a comfortable lifestyle during your retirement years. The primary objective is to accumulate enough funds to support your living expenses when you are no longer working. When you hear the phrase “retirement planning,” think about ensuring you have enough income to sustain you in the future, when you’re still living.

The Right Timing for Estate Planning

Estate planning is typically concerned with the transfer of assets after death. It involves preparing Wills, establishing trusts, assigning beneficiaries, and naming guardians for minor children. There is only one right time for estate planning and that is right now! As Mason Corn, Blum’s attorney, explained, Blum knew he needed an estate plan immediately. “I spoke to Roman many times before he passed away, and he knew what to do, how to name beneficiaries. Two weeks before he died, I had finally gotten him to sit down. He saw the end was coming. He was becoming mentally feeble. We agreed. I had to go away, and so he told me, ‘O.K., when you come back I will do it.’ But by then it was too late. We came this close, but we missed the boat.”

No matter how old or young you are, whether you have children or not, whether you’re a millionaire or barely getting by - now is the right time to plan for your death. The phrase “plan for your death” makes a lot of people uncomfortable, but just because you write a Will doesn’t mean you are going to die tomorrow. Hopefully, you won’t die for a very long time, but if it bothers you, then just think of it as a kind of catastrophic insurance, something you need just in case.

The Right Timing for Retirement Planning

Retirement planning is a long-term process that starts much earlier in life, ideally during your working years. It involves setting financial goals, saving and investing for retirement, estimating retirement expenses, and creating a plan to generate income during retirement. If you’re an adult who is working then it’s a good time to start thinking about your retirement. There are retirement calculators online that can help you achieve your financial goals.

Components of a Good Estate Plan

Estate planning includes things like drafting a Will, establishing trusts, designating a power of attorney, creating advanced healthcare directives, and strategizing to minimize estate taxes. That sounds like a lot to do, but you don’t have to do all of that today. The most important legal document you create as part of a good estate plan is a Will. A Will summarizes your wishes, including who should receive your assets and who should be the legal guardian for your children. You don’t need an attorney to write a Will that is legally sound in your state of residence. FastWill is here to help you create a great Will in minutes and at a fraction of the cost of a lawyer.

Blum’s friends were mystified about why he didn’t leave a Will. Paul Skurka, a fellow Holocaust survivor, told the New York Times that Blum “was a very smart man but he died like an idiot.” Blum married a fellow Holocaust survivor, Eva, and the two eventually settled in Forest Hills, Queens. They didn’t have children and the couple divorced after 50 years of marriage. Friends believed that Eva Blum was a victim of the dreaded Nazi doctor, Josef Mengele. 

Components of a Good Retirement Plan

Retirement planning involves setting goals, determining retirement income needs, calculating Social Security benefits, investing in retirement accounts (e.g., 401(k), IRA), and considering healthcare and long-term care costs. This is something that Blum obviously had an excellent grasp on. Shortly after the Verrazano-Narrows Bridge was built, Blum started building and selling homes in the Staten Island area. He then parlayed that into wise investments into stocks and bonds. 

Write a Will Today

No one is quite sure why Blum didn’t follow through with estate planning, but his friends believe it had something to do with the need for secrecy he developed while surviving World War II. He was reluctant to share the details of his wealth. The estate’s lawyers did a worldwide search for heirs but as of 2020 couldn’t find any. This tale may yet have another chapter.

The lesson of Roman Blum’s life and death is that you must have a plan to preserve and transfer your assets upon death. While estate planning and retirement planning have distinct goals and components, they are interconnected. The assets accumulated during your working years through retirement planning become part of your estate and are subject to the estate planning process upon your death. It is essential to integrate both aspects into your overall financial plan to achieve your long-term objectives and ensure a smooth transition of wealth.

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