A good place to start the planning process, is income planning. We suggest first determining about how much income you will need in retirement. A reasonable staring point is how much you spend now. Once you figure that out, add up the guaranteed income you will have in retirement, like Social Security, pensions, annuity income or anything else that is guaranteed. The remainder of your income will need to come from your savings and investments like an IRA or 401k. A good financial planner can give you a good idea of how much income you are able to sustain, given the value of your investments and how much risk you are willing to take.
Typically, life insurance is most useful before retirement to provide for dependents when you are gone. However, there are some rare situations where life insurance could make sense post retirement.
When should you start retirement planning?
Now, as soon as you have income. Even if you plan on working forever, being financially able to decide what you do with your time is incredibly powerful. The earlier you start; the more freedom you will have to decide what you want to do.
What steps should be taken in retirement planning?
Retirement planning doesn’t have to be complicated. We suggest first determining about how much income you will need in retirement. A reasonable staring point is how much you spend now. Once you figure that out, add up the guaranteed income you will have in retirement, like Social Security, pensions, annuity income or anything else that is guaranteed. The remainder of your income will need to come from your savings and investments like an IRA or 401k. A financial planner can give you a good idea of how much income you are able to sustain, given the value of your investments and how much risk you are willing to take.
How does a pension affect retirement planning?
A pension increases the amount of guaranteed income you have in retirement. This provides more stability and confidence. It can allow you to retire earlier, spend a bit more or just have more confidence in your retirement income.
How do you account for inflation in retirement planning?
There are many risks in retirement, one of them is the risk your income will not increase at the same rate as your expenses. One way to mitigate this risk is with investments that can grow as fast or faster than inflation. A couple examples include stocks and real estate. Talk to a financial planner for a more in-depth analysis of your individual situation.
What are the potential risks of not planning for retirement?
One of the risks in failing to plan for retirement is being unable to stop working when you want to. Or being forced to find a way to live on what you have if you are unable to work due to disability or unforeseen circumstances. The average retirement age in the United States is 62, and many of these people retired because they were forced to, not because they wanted to.
Can I do my own retirement planning?
Yes, you can do your own retirement planning. However, it can also be beneficial to get a professional opinion, especially if you are in a transition period, like changing jobs or within a few years of retirement. Good advice and small changes can have an outsized impact on your retirement plan when you are in a transitionary period.
Does estate planning include retirement planning?
Part of retirement planning is making sure your wishes are followed even if you are no longer able to make those wishes known. This could be due to death or disability. An estate plan means putting those wishes in writing, this includes a will and/or trust, a living will, power of attorney, health care power of attorney and possibly more depending on your specific wishes.
