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Creating a Successful Retirement Plan in 5 Steps

So much of retirement planning focuses on the money, but that is often part of the process, not the whole process.

Creating a Successful Retirement Plan in 5 Steps

While retirement planning can often be a stressful activity, the truth is, the process can be enjoyable both for you and your partner if you come at it from the right perspective. In this article, we will go over five steps you can take to get on top of your retirement planning. Obviously, the earlier you do this, the better. Considering 1/3rd of Boomers have little to no savings[i] and fewer people receive any kind of workplace pension, that is a lot of people who may find real hardship once retired. Much like the story of the grasshopper and the ant saving up for winter, with a little time and preparation, you can avoid real hardships up ahead.

What Will Your Retirement Look Like?

This is a very important question, if not the most important. You can't save up enough if you don't know how much you'll need, because you don't know where you will be and how you will spend your time. So this is step one, what do you want to do? What kind of lifestyle? Do you want to travel, volunteer, garden, stay working part-time? Do you want to move closer to grandkids? Downsize to a smaller and less expensive home? What about your spouse? Are you retiring at the same time or staggering? And what do they want? You can't get too far in your planning without envisioning your retirement. Considering you may be retired for 20 to 30 years, that is a lot of time to plan for, in that time inflation will have made what cost you $10 to cost more than $20. Important also to factor in health and mobility, for example, living in a place that has one level and minimizes the need to drive, can save you money by allowing you to stay in the one place longer.

Do you know how much money that will take?

The amount you need for your ideal retirement and the amount you have may differ. This may cause panic but fight it, with a little time and discipline you may be closer than you think. First off, you should make sure that you are taking advantage and making maximum contributions to any employer match programs. On top of that, setting your direct deposit to automatically put a percentage into your savings account may help build your emergency fund. If you delay your Social Security you will lock in a higher rate when you start collecting. When crunching numbers, this is also a good time to think about downsizing your home, vehicle, etc. and selling any items of value that you do not use anymore. Is not already this is an important time to create a budget and sticking to it.

What About the Unexpected?

We do not get a crystal ball with our investments, unfortunately. No risk no reward, as they say. Investmenting comes with a risk, but at the same time, the biggest risk is not investing at all. It is very hard to save up the amount needed in retirement with fixed income investments alone. This is where having a diversified portfolio is important, as it will achieve returns at a risk level lower than an undiversified portfolio. It is also why it’s good to schedule at a minimum a yearly portfolio review to rebalance your investments as needed. On top of your investing, having an emergency fund to help deal with the unexpected events in life should eliminate the need to cash in and take penalties on any long-term savings. When 40% of Americans cannot come up with $400 in an emergency[ii], knowing that you have a safety net is essential and should be part of your financial plan. Life’s unexpected moments, be it a lay-off, poor health, an emergency etc. should be factored into your savings plans as much as able. Having your beneficiaries, your insurance policies, power of attorney, and all your estate documents in order is a good way to be prepared and avoid additional hardships.

What About the Later Years?

The later years of retirement, with ailing health and the possibility of long-term care, are often not the part of retirement planning that we look forward to. However, the more time is given to them long before it is a necessity, the better off you will be and have things done on your terms. If you'd like to stay in your home, for example, as 90% of Americans over the age of 65 do[iii], downsizing and making modifications to your home (bathrooms more accessible, bedroom on the first floor, etc.) may be a smart investment. Having conversations with your spouse and family about expectations, power of attorney, and your end of life wishes can save confusion and heartache. Getting as much in writing as possible and like anything, be willing to update and change your wishes and expectations as life throws things your way. 

Bringing in the Cavalry

Retirement planning can feel overwhelming. The good thing is that there are so many services and specialists out there ready to help you get on track and feeling secure. If you are more of a do it yourself type, looking into online money management and planning services may be what you need. For those who prefer a more personal approach, seeking out a fiduciary, fee-only financial advisor who specializes in retirement planning should get you where you need to be.

Finding Financial Peace

Retirement is an exciting time in life. The fruits of your labor are being able to have enough income to maintain their dignity and independence in retirement. It may seem overwhelming and the amount of money needed may seem daunting, but with some forward thinking, candid communication with your family, and keeping to your budget, the goal is not as far out as it may seem. This is a great time to seek out professional help, as there are so many complex details regarding investments, taxes, insurances, and everything else that it can make your head spin. Talk to experts and get yourself on track, the peace of mind of being financially secure and on track is priceless.


[i] https://www.cnbc.com/2018/11/07/one-third-of-baby-boomers-had-nothing-saved-for-retirement-at-age-58-.html

[ii] https://money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html

[iii] https://www.forbes.com/sites/nextavenue/2015/10/27/many-of-us-want-to-grow-older-where-we-now-live-will-our-homes-let-us/#67477674216f

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