Retirement planning requires careful thought and detailed preparation. It requires time and dedication to establish a savings plan, invest it, and watch its value grow over time – which makes saving earlier all the more crucial in an age where longevity increases and many retirees retire at older ages.
At retirement age, it’s essential to gain an accurate picture of how your savings and investments are shifting as you approach this new stage in life. Furthermore, it makes sense to create a comprehensive retirement planning process which addresses key considerations and goals unique to this stage.
One key consideration in retirement planning is managing sequence of returns risk – or the fear that you’ll run out of money during retirement – in an effective way. To reduce this risk, it is wise to create a “safety-first” basket to cover basic needs like food, shelter and healthcare as well as any nonportfolio income sources like pensions or Social Security payments. In addition, short-term bonds should also be part of this basket to mitigate sequence of returns risk.
Once this first basket has been established, then you may wish to consider allocating more aggressively for discretionary spending needs such as travel or more frequent activities. But remember: Riskier investments have higher potential returns but can increase losses during bear markets.
Taxes can be an essential element of your overall costs. A proper tax strategy that supports your retirement planning objectives – perhaps by consulting with a CPA or another trusted tax advisor – could include devising a “tax efficient” withdrawal strategy which accounts for RMDs, Social Security benefits and other pertinent issues.
At the core of it all is estate planning – something which can be complex when there are multiple beneficiaries or possible trusts involved.
At this stage, it is crucial to work with an experienced financial professional who can guide you through these complexities and ensure your retirement plans are working towards meeting your goals. Our courses aim to assist financial professionals navigate these challenging aspects of retirement planning such as goal setting, investment strategies, optimizing social security benefits and tax efficiency.