Nearing Retirement? It's Time to Focus on Goals Instead of Investments

In some ways, life in retirement is tougher than years you spent in the workplace, or at least more complex. You have many decisions to make about where your money will come from and how to preserve it.

(Image credit: UWE UMSTAETTER (UWE UMSTAETTER (Photographer) - [None])

You’ve worked, wondered and perhaps second-guessed yourself for years as you monitored the investments that — you hoped — would one day provide you a well-earned and fun-filled retirement.

But as the day of your actual retirement draws closer, I suggest it’s time to change the focus of your investment planning. Your planning needs to encompass your unique retirement goals — hobbies, travel, grandkids, fitness, volunteering, loafing, etc. — and you need to be intentional about making your investments support your goals.

When you’re working, you’re in the “accumulation” phase with one big, hairy goal — live on less than you make, saving as much money as possible through various investments. Retirement, however, is often more complicated. How could retirement possibly be more complicated than employment? After all, the accumulation phase may have involved a volatile stock market or real estate market that didn’t always cooperate with your savings plans — and perhaps resulted in a few sleepless nights.

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Retirement is often more complicated because you move into the “distribution phase,” when you begin to draw on your various investments for annual income. Investments now become more intertwined with decisions about income, taxes, health care and legacy.

You need to balance decisions about how to support your retirement lifestyle and goals while also planning for the many predictable aspects of retirement, including taxes and death. You need an income strategy to make sure you can maintain your lifestyle and not outlive your money. You need a tax strategy that integrates with your investment and income strategies and is adapted to the current tax environment. You need a health care strategy that considers your long-term care needs and wishes. And, if you want to leave an inheritance that is a source of blessing and not a source of conflict, you need a legacy strategy.

Does reading this make you anxious? Don’t let it! Good retirement planning based on your unique goals can create confidence.

Let’s look at a couple of the strategies that will help make your investments work to support your retirement goals:

Income strategy.

Once you no longer have to report to work each day, you finally have time for the hobbies, travel, volunteering or other things you postponed while you concentrated on your career and family. But where will you get the money, and how can you feel certain that you won’t run out?

Likely sources of income may include Social Security and retirement accounts, such as an IRA or a 401(k). Perhaps you have a pension. You and your financial professional can review what you have and design an income strategy that works for you and considers adjustments to the strategy if a spouse passes away or if you want to travel more.

As you examine your finances, you’ll be making decisions. Maybe you will need to tighten your budget. Maybe you will need to defer one or two particular goals, such as that trip to Italy, until your Social Security or pension kicks in. By being intentional with the planning process, you can ease some of your anxieties. The key at this point in life, though, is to let your goals inform any investment decisions, and not the other way around.

Tax strategy.

Retirement definitely has its unknowns, but some things are predictable, such as taxes. For many pre-retirees and retirees, a good percentage of their retirement savings is tucked away in tax-deferred accounts, such as a traditional IRA, 401(k) or other qualified account. Uncle Sam is expecting his share when you start withdrawing money in retirement.

In fact, once you are 70½, the federal government will require you to begin withdrawing a minimum amount each year (e.g., required minimum distributions, or RMDs), and taxes will have to be paid.

One of your retirement goals should be to transition investments held in tax-deferred and taxable accounts into tax-free accounts. A tax strategy would explore opportunities to shift money into tax-free accounts, working within the current tax reform environment to pay taxes now when rates are historically low. Accelerating tax payments now may position investments to continue growing tax-free and allow for a more flexible withdrawal strategy. Some examples of how to accomplish this include contributing to a Roth IRA, converting to a Roth IRA, and investing in a cash value life insurance policy.

The bottom line for soon-to-be retirees

Some people do a better job planning for retirement than others. But whether you’ve spent your life handling your own finances or worked with an adviser during the accumulation phase, it’s time to reframe your thinking and concentrate on goals instead of investments.

If you consider working with an adviser, make sure he or she is a fiduciary who is working in your best interest and is a retirement specialist who understands the challenges and opportunities of this unique season of life. I often compare working with an adviser to my approach to fly fishing. I could fish on my own, but when I want to be really successful on a new stream, I engage a local, professional guide who does it for a living and “knows the water.” I want to enjoy the fishing and not have to worry about the logistics, the gear or the current conditions. I want to have a guide at my shoulder, assisting me to a greater level of success and enjoyment than I can achieve on my own.

Ronnie Blair contributed to this article.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and J. Biance Financial, Inc. are not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 143503

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Carlton W. Murrey, Investment Adviser
Wealth Management Adviser, J. Biance Financial

Carlton Murrey is the wealth management adviser with J. Biance Financial (opens in new tab). He began his financial services career in investment banking and held positions as director with Carolina Financial Group and as an associate at Wachovia Securities.