When it comes to retirement planning, people often look at two magic numbers: age and income. With effective planning, you get to retire at the age you want with the income you desire. Unfortunately, arriving at these numbers isn’t always easy. They require a careful analysis of not only your goals, but how much you need to spend annually to maintain your lifestyle. Questions like “What kind of lifestyle do I want to live?” and “Where do I want to live?” during retirement must be answered as honestly as possible. Considerations for travel, family obligations and healthcare needs must also be factored into the planning process.
More importantly, these sources of income must cover your expenses for the rest of your life after retirement.Then there’s the process of identifying how much income you’ll need to meet your goals. Most retirees rely on a combination of social security, personal savings and investment assets to cover their living expenses. But even those need careful attention due to factors outside our control, such as inflation, market returns and possible shifts in government policy impacting social security.
Longevity is another important consideration in your retirement planning, as significant improvements in life expectancy mean preparing a nest egg that can last 20, 30 or even 40 years. Consider that the average American male now has a life expectancy of 18 years after the age of 65. For the average woman, it is 20.5 years. As you can see, longevity is changing our assumptions about how much retirees should prepare for the future.
To make sense of this puzzle, a financial plan is needed as early as possible. Think of the financial plan as a comprehensive assessment of your current financial situation with the goal of calculating if you are on track to meet your retirement need . The financial plan can also help you develop a clearer picture of your retirement and the steps needed to get there.
For example, investment planning is a critical aspect of retirement planning. A financial plan can help you identify risk tolerance for investing in the market, which can then shape your expected rate of return and asset growth until you reach retirement age. People assume you need less risk in retirement but with inflation averaging 3.1%, you will need growth in your portfolio unless your resources are great and your needs are very low.
Putting all this together on your own can be a daunting task, especially when it comes time to figure out how much to invest and in what markets. Working with a CERTIFIED FINANCIAL PLANNER™ can help you develop a long-term perspective to growing your wealth in preparation for retirement.
By working with a professional, you will get a better sense of where you are today, where you want to be (retired) and the probability of success in reaching that goal. A professional is also best suited to gauge things like risk tolerance, current and future expenses and expected market returns for your investment. They put all this together in a financial plan that will prepare you for retirement.
There’s only so much online calculators can do in helping you plan for the future. To get your retirement planning right the first time, speak to a CERTIFIED FINANCIAL PLANNER™. They will help you keep your retirement dream alive.
About the Author, Laurie E. Ingwersen, CFP®, CRPC®, CDFA™
Laurie is a Senior Wealth Management Advisor with The Harvest Group. She is a Certified Financial Planner™ Practitioner, CFP®, a Chartered Retirement Planning Counselor, CRPC®, and a Certified Divorce Financial Analyst, CDFA™. As a CRPC®, Laurie’s knowledge is key in assisting clients as we work with them toward a worry-free financial future. She specializes in insurance and annuities, and can assist in all aspects of retirement and estate planning. Laurie can be reached at firstname.lastname@example.org.
About The Harvest Group
Based in Waltham, MA, The Harvest Group is a family-owned investment advisory firm that specializes in family wealth management through its Harvest Wealth Management for Life™ service. The firm is committed to serving as a constant resource to help its growing clientele of individuals, families and family businesses flourish in all aspects of wealth management, investment management and financial planning. Services are provided in a clear and transparent manner in order to meet the fiduciary duty of always acting in clients’ best interests.
The Harvest Group Wealth Management, LLC is an SEC registered investment adviser principally located in Waltham, MA. Information regarding our firm’s services can be found at www.myharvestgroup.com. A copy of our current written disclosure Brochure discussing our advisory services and fees remains available upon request.
 Robert Powell (Oct 5, 2015). “For your retirement planning, count on living until age 85.” USA Today.