Planning for retirement is not what it used to be. The proverbial gold watch and the lifetime pension are almost a thing of the past. People planning today must be much more involved in where they want to go and how they plan to get there. Here are some financial planning tips to help you travel the right road:
Start with a current retirement analysis. Based on your current retirement savings, are you on track to achieve your desired retirement lifestyle? If not, you may want to modify your current savings plan or lower expectations.
Is there wiggle room in your budget? Being unaware of your actual expenses is a big roadblock to comfortable retirement. Where does the money go? We suggest viewing a full year’s spending, then dividing each expense category by 12 months so you capture 1/12th of your property taxes, insurances, car repairs, and tires – all those things you may pay once or twice a year. It’s incredibly eye opening! You’ll soon know whether you have any wiggle-room to save more for retirement or whether your current spending habits need to change.
Take the freebies! If your workplace retirement plan offers a matching contribution, take it! Other free stuff – from auto-escalation (which annually increases your contributions) to plan calculators and participant-education programs – are worthwhile too. Diversification and timely reviews of retirement investments, other assets and strategy, are critical to helping you achieve long term investment goals.
Stress test your assumptions: Build uncertainty into your retirement projections, along with some “worst case” assumptions. If longevity runs in your family, add five years to the age of your oldest relative to estimate your own life span. Inflation is a “silent thief” so do consider its effect on projected expenses – remembering that medical and energy costs are often higher than other expenses.
Insure the “what ifs.” As you near retirement, explore long-term care insurance coverage. There are “hybrid” policies which convert unused benefits into life insurance coverage, which can be a great alternative to the “use it or lose it” coverage.
Make sure family members are doing their financial planning. Your plans for retirement can be completely sabotaged if you have to take financial responsibility for caring for other family members. Talk with your children – particularly if they have children – make sure they have adequate life insurance should you find yourself being full-time parents again.
Retiring early while you still have health, energy, and a full bucket list, is not an impossible dream. But early planning is critical to the “road you choose to take.” Not comfortable with planning on your own or simply don’t have the time? A professional can help you strategize how to turn your hopes and dreams into a reality. FinancialFocusLLC.com
Securities and advisory services offered through National Planning Corporation (NPC). Member FINRA/SIPC, a Registered Investment Advisor. Additional advisory services offered through Financial Focus LLC, a Registered Investment Advisor. Financial Focus LLC and NPC are separate and unrelated companies. The opinions expressed are for educational use only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC.