It’s never too early to begin financial planning for your retirement. Many of us realize this when it’s almost too late. Consequently, we enter those Golden Years without the income needed to maintain our expected lifestyle.
For sure, the whole process of saving for retirement is more than just making monthly additions to the company 401(k), or setting aside money to meet future spending goals: vacations, college and, of course, that all-important emergency fund.
But, like a contractor who is building a house, we need a blueprint that outlines the investment strategy necessary to help guide our retirement investing.
If you’re lucky to have a 401(k)…
The shift by employers to change their retirement offerings for their employees has moved from the traditional pension (defined contribution) plan to a defined contribution plan. Usually, such plans are sponsored by an employer who works through a plan administrator-..Vanguard or Fidelity, for example—to let employees choose from an array of mutual funds.
Today, a favored option in defined contribution plans is the category of target-date mutual funds. Investopedia’s definition points out that these funds…
“…automatically resets the asset mix of stocks, bonds and cash equivalents in its portfolio according to a selected time frame that is appropriate for a particular investor.”
Investors are always in control of their 401(k) plan, and employers may choose to match their employee’s contribution on a percentage basis. In such instances, the employer receives major tax breaks.
The percentage of matching funds is completely up to the discretion of the employer. As an example, with a 3% match, an employee making $30,000 a year would receive a ‘bonus’ of $900 direct-deposited into the employee’s 401(k).
Saving for retirement as we ‘age.’
To protect those assets from unexpected nursing-home costs in later years, investors should consider purchasing long-term care (LTC) insurance. Typically, nursing home and in-home care costs are picked up, or a portion thereof.
Retirement funds are given an added boost when there is little or no debt payments to make, such as car payments, mortgages and credit card bills.
Choosing ‘how to live’ in your ‘60s and beyond.
For most retirees, they will rely on Social Security benefits as a secure source of monthly income. In other cases, that ‘anchor’ may be a federal or corporate pension plan.
Retirees looking for ways to enhance their income streams should consider delaying receipt of their Social Security benefits. For each year they wait, those benefits go up by a whopping 8%, which makes many annuities or CDs pale in comparison.
Obviously, it behooves the investor to seek guidance from an experienced financial profession during these years. A financial advisor can review the portfolio and suggest a withdrawal strategy to optimize the retiree’s savings.
Topping the list of concerns for retirees is the state of their health: the 80’s are often referred to now as the “new 60s.”
‘Spending’ in retirement
Retirees should not only be concerned on how they are going to spend their hard-earned money throughout their Golden Years, but how they are planning to spend their time.
Ken Blanchard, the author of “The One Minute Manager,” gave a twist to the typical ideas about retiring. He claims it is more about “Refire! Don’t Retire!” As such, retirees should look inward and look for ways to test new boundaries of “intellectual, physical and spiritual” pursuits.
Planning for retirement should also include an overall estate plan, one that will not only protect assets, but also maximize tax savings while naming beneficiaries.
Contact us: Schedule a chat with a proven financial advisor, one that is experienced in developing a well-balanced portfolio based on your overall investment strategy.