Embarking on the journey to a fulfilling retirement? Here's a roadmap! Discover five crucial steps that can guide you towards a retirement that's not just safe and secure, but also filled with joy and excitement.

Retirement planning starts with thinking about your retirement goals and how long you have to meet them

Then look at the types of retirement accounts that can help you raise the money to fund your future

  • Invest it to enable it to grow
  • Taxes are a factor when drawing down on retirement accounts
  • Start planning for retirement as soon as you can to take advantage of the power of compounding

Understand Your Time Horizon

The longer the time from today to retirement, the higher the level of risk your portfolio can withstand

  • In general, the older you are, the more your portfolio should be focused on income and the preservation of capital
  • A multistage retirement plan must integrate various time horizons, along with the corresponding liquidity needs, to determine optimal allocation strategy

Stay on Top of Estate Planning

Having a proper estate plan and life insurance coverage ensures that your assets are distributed in a manner of your choosing and that your loved ones will not experience financial hardship following your death.

  • A carefully outlined plan also aids in avoiding an expensive and often lengthy probate process.

Determine Retirement Spending Needs

Most people believe that after retirement, their annual spending will amount to only 70% to 80% of what they spent previously

  • This is unrealistic, especially if the mortgage has not been paid off or if unforeseen medical expenses occur
  • Accurate retirement spending goals help in the planning process as more spending in the future requires additional savings today
  • Update your plan once a year to make sure that you are keeping on track with your savings

Bottom Line

The burden of retirement planning is falling on individuals now more than ever

Calculate After-Tax Rate of Investment Returns

A required rate of return in excess of 10% (before taxes) is normally an unrealistic expectation, even for long-term investing.

  • Depending on the type of retirement account that you hold, investment returns are typically taxed. Calculating your tax status when you begin to withdraw funds is a crucial component of the retirement planning process.

Assess Risk Tolerance vs. Investment Goals

How much risk are you willing to take to meet your objectives

  • Should some income be set aside in risk-free Treasury bonds for required expenditures?
  • Make sure that you are comfortable with the risks being taken in your portfolio and know what is necessary and what is a luxury

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