You work all your life in hopes that one day you can enjoy the benefit of your hard work and retire. While this is something we all look forward to one day, instead of it being a happy time, it can be extremely scary and stressful. There are so many uncertainties that go with retirement. Having a plan that is updated each year, and designed to keep you on track, can be a great way to plan for your future. We strive to give our clients security when it comes to planning for retirement. Below are key factors that will help determine if your retirement plan is on track before and in retirement.
Net Worth Statement
The foundation of any retirement plan is having a Net Worth Statement showing all assets and liabilities. This includes any bank and investment accounts, properties and outstanding loans. Assets are categorized are either qualified or nonqualified. This is to separate those assets that you’ll have to pay taxes on the withdrawals.
It’s important to have a well-diversified portfolio when going into retirement. You can handle market swings when you are younger. However, as you approach retirement you have less time to recoup losses. Adjusting your investment portfolio to meet your needs in retirement is an important task we handle for our clients.
Income and Social Security
A retirement plan shouldn’t be thought about just when you’re nearing retirement. It should be thought about in preparation for retirement – the sooner the better! We factor in the income that you are currently making, when you would like to retire and what income you will have during retirement. Pensions and Social Security play a key role in retirement income. We also evaluate how to maximize your Social Security given your situation and help guide you through that process.
While none of us have a crystal ball telling us how long we’re going live, on average we are living longer. According to the Social Security Administration, a man reaching age 65 today can expect to live, on average, until age 84.3. A woman turning age 65 today can expect to live, on average, until age 86.7. This is just the average, about one in four 65-year olds today will live past 90.1 With this in mind, we analyze our client’s retirement projections to age 95 or 100.
This is usually a hard one for clients. How much do you spend each month and on what? While some clients have elaborate spreadsheets and consistently track their spending, others don’t want to think about it. Looking at how you are spending your money each year will give us an estimate of how much income you’ll need in retirement while factoring in inflation. We look at what you’re going to need to take from your assets outside of the income you’ll receive from Social Security, Required Minimum Distributions (RMDs) and a Pension (if you’re one of the lucky ones!). It’s also important to factor in health care costs in retirement. With life expectancy increasing along with health care costs, this will likely be a heavy area of spending.
Planning retirement can be challenging considering the range of uncertainties such as how long you will live, market performance, inflation, taxes, and more. With some planning and guidance, you will be more prepared for a comfortable future.
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