As a financial advisor, I don’t think it’s ever too early to start planning for retirement. Ideally retirement planning starts as soon as an individual starts earning money, even on their very first job. However, specific planning really ramps up in the years and decades just before retirement. That’s when it’s important to start visualizing what retirement might look like for you. Using that information is a great way to understand how much money you’ll need to support that lifestyle.
Here are some tips to start preparing for retirement.
Questions to ask yourself before retirement
Define your retirement. Ask yourself the following questions:
- What is your daily schedule like?
- What sort of trips do you take?
- Where do you live?
- What city, state and country?
- Do you live in a house, condo or apartment?
- What kind of car do you drive?
- Where are your grandkids?
- How long do you expect to live . . . really?
These are all great things to think about before you retire. Here are some more specific things a CERTIFIED FINANCIAL PLANNER™ professional would want to know before you retire:
- What are your monthly expenses in retirement based on today’s dollars?
- What is your age now? What was the age of your parents and grandparents at their death?
- How is your health today?
- How much have you saved for retirement so far?
- What assets do you own other than retirement savings?
- What retirement income have you earned besides Social Security benefits?
How much is enough for retirement?
In order to answer the question, “Can I retire yet?” you need to have answers to almost all of those questions. If you can answer them, I could give you a very specific prediction of when you will be ready to retire. This videoalso gives you an idea about how to think about how much you need for retirement.
Am I saving enough for retirement?
Without knowing for sure the details of your retirement, you can still be confident that you should save as much a possible. Most experts talk about 20 percent of gross earnings saved to retirement as a healthy savings rate.
What if the markets crash?
In order to reduce your risk from the inevitable swings in market prices, there are some things you can do:
- Consult with a CERTIFIED FINANCIAL PLANNER™ professional to be sure you own the correct sorts of investments.
- Hold more cash to cover emergencies so you don’t need to sell anything during a temporary downturn in price.
- You can purchase an annuity to provide guaranteed income regardless of market conditions.
How can I reduce my risk?
Many people like to reduce their financial risk profile as retirement draws near. Here are a few things to consider:
- Pay off your mortgage to reduce your monthly housing cost.
- Identify work you could, and might like to do, during retirement. There are several benefits to this idea:
- This additional income can be a huge help to your retirement lifestyle.
- Many people feel more useful and content when they have work to do.
- Sometimes you can actually add to retirement savings.
- Maybe it lets you stay connected to career colleagues.
- Relocate to live in a place with lower expenses. Sometimes people move to lower cost towns or lower tax states, or low-cost foreign countries.
- Transfer the risk of a long-term healthcare need to an insurance company. Statistically, most couples will need long-term health care assistance for one of them as they age and insurance can be a very efficient way to meet that need. You always want to consider this option. Preferably, you can evaluate the insurance ideas with the advice of a fiduciary who is not selling you the insurance.
Do I need a financial advisor in retirement?
After reading this far, it’s possible that you might feel like this is a bit confusing and maybe overwhelming. If that’s true, maybe you would like some advice and help from a CERTIFIED FINANCIAL PLANNER™ professional. You should expect a free initial consolation and that might be enough to give you a clear idea of what you want to do next.
So let’s start by finding a CFP® professional near you by clicking here.
As you visit with financial planners, I suggest a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-only, CFP® professional can help you make great retirement planning choices and develop a holistic financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you wanting to talk about retirement planning, contact my office firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.