This seems like a no-brainer, but you’d be surprised how many people — especially couples — haven’t given much thought to what they want to do in retirement. They don’t know what their location, lifestyle or future needs and wants might look like as they age. (Just in case you’re wondering, “I want to buy a boat” is not a retirement plan.)
Once you’ve come up with your retirement objectives, you can create a budget based on your estimated expenses, including housing, transportation, health care and leisure activities. Yes, it can be difficult to predict what some costs might be far into the future, but this exercise will help you grasp how much you’ll need to maintain the lifestyle you want — and deal with some pitfalls along the way.
Once you have a better idea about your costs, you can create an income plan. This means figuring out all the income streams you expect to tap in retirement (Social Security, a pension, workplace retirement plans, other investments, etc.)
If you have a shortfall between the money coming in and the money going out, you’ll need to come up with a way to cover the difference. (Save more? Spend less? Work part-time in retirement? Delay retiring or claiming Social Security for as long as possible?) The sooner you know what you’re facing financially, the sooner you can work to remedy any problems.
Asset allocation is the process of dividing your investment portfolio among different asset classes, such as stocks, bonds, cash and cash equivalents. The goal of asset allocation is to create a diversified and balanced portfolio, which can help reduce risk and increase returns over the long term.
A financial adviser can help you determine the right asset allocation for your retirement portfolio based on your risk tolerance, investment goals and time horizon.
When soon-to-be retirees dream of retirement, they typically picture themselves on the golf course, traveling or playing with their grandkids. The good stuff. But it’s important to prepare for whatever life throws at you through the years. This could mean:
- Choosing the right Medicare plan to fit your individual needs.
- Considering how you might cover the rising cost of long-term care (with long-term care insurance, for example, or another available option).
- Ensuring your surviving spouse is taken care of if you die first (with life insurance, the right Social Security claiming strategy, etc.).
- Drawing up an estate plan to leave a legacy for your loved ones if that’s a priority for you.
People tend to underestimate the bite taxes can take from their retirement income every year. If you have a tax-deferred retirement plan (401(k), 403(b), etc.), you’ll pay taxes on your withdrawals. You also may be required to pay taxes on a portion of your Social Security income. Some strategies can help minimize the damage taxes can do in retirement.
Still, the sooner you put your plan in place (by gradually converting some of your retirement savings to a Roth IRA, for example), the better off you’ll be.
Can you create a do-it-yourself retirement plan? You can. But nearly every action I’ve listed here would be better managed by a professional. A good financial adviser can assist you through every step of retirement planning, from goal setting and guidance to implementing your chosen strategies. And with regular financial checkups, your adviser can help ensure your plan stays on course.
Like any important milestone, retirement takes planning. And a bit of courage. If you’re feeling anxious about your financial future, especially in these uncertain times, a solid plan could help you get on track so you can reach your retirement goals.
Kim Franke-Folstad contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
