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Retirement Planning 101

June 29, 2020

Considering retirement in the age of coronavirus can be overwhelming. We’ve got your back. So let’s talk about retirement 101. The first step is identifying your retirement goals. Retirement planning is a multi-step process.

Here are the 5 retirement basics to keep in mind:

  1. Map out your retirement horizon. The longer you have before you retire, the higher risk you can afford to take with your portfolio. If you have 10 to 30 years left before you retire, the potential volatility will likely be worth the gains you will earn with higher-risk options. The closer you are to retirement, the more focused your portfolio should be on preserving your already-existing capital.
  2. Evaluate your financial needs during retirement honestly. You need both security and cushion. So what will the cost be? How much money do you need to lead the quality of life that you want to maintain after you retire? Do you expect to spend your retirement traveling?
    Shopping? Attending expensive events? Buying a new home? Paying for a family member’s education? There’s no benefit to lying to yourself about your financial expectations. Be upfront. Be honest.
  3. Calculate after-tax returns from your investments. Investment returns are typically taxed when taken out after retirement. Be sure to include those taxes in your calculations or you will find yourself short on income.
  4. Keep risk-tolerance in mind based upon your age. The best portfolio balances risk aversion with return objectives.
    You need a mix of both for growth and maintained security. How much risk are you willing to take to meet your retirement goals?
    Ensure that your needs are being met for financial security, but keep in mind which investments are luxuries. Don’t be a micro-manager, but ensure that you are comfortable with the risks being taken in your portfolio. Remember that funds which are underperforming this year, might be very kind to you next year.
    Trust your financial advisor and don’t be too quick to bail out.
  5. Keep one eye on estate planning and life insurance. Other elements of retirement planning are also crucial to review with your team of lawyers, attorneys, and estate planners. Wills, trusts, lifetime insurance, taxes, and legacy planning are some of the factors to consider when you begin your retirement planning. If you’re ready to sit down and talk with a retirement planner, schedule a consultation with Abich Financial Services.