3 Steps You Can Take Now to Gain Control of Your Retirement

Do-it-yourselfers have some work ahead of them, and here are three places to start.

Given the year we’ve experienced, most people are feeling justifiably anxious about protecting their retirement investments.

Some nervousness is normal at any time, of course, since we can never predict what the markets or the overall economy will do. But there are things investors can do now to gain more control over their finances and prepare for what might come next.

(You can DIY these steps to a degree, but at some point, you may find you need or want to get professional help — to save time, to avoid making expensive mistakes and to be sure you haven’t missed out on any money-making or money-saving strategies.)

1. Determine your risk tolerance and risk exposure

How much risk are you willing — and able — to accept when it comes to future returns? Here are some things to consider:

  • There’s a difference between emotional risk tolerance and mathematical risk tolerance. Emotional tolerance is the level of loss you can handle without churning with worry at night or making knee-jerk moves that could end up costing you money. Mathematical tolerance is the level of loss your plan can actually afford to take and still have enough money left to provide the income you need. Both are important factors when deciding the appropriate asset allocation for your portfolio.
  • Many people adjust their level of risk based on their “time horizon” — the number of years they expect to grow the money in their portfolio before they retire. Young investors, for example, are generally open to taking on more risk because they know if the market suffers a downturn, they’ll have time to recover from the loss. Older investors typically have a lower risk tolerance, especially if they are about five years away from retirement, or are less than five years into retirement. (I call this period the hazard zone, because it requires extra vigilance.) Soon-to-be retirees who will depend on their investments for income must take into account what an ill-timed downturn could do to their retirement plans.

How a specialist can help: Many investors believe they have a well-diversified portfolio because they see several different mutual funds in their accounts.  Unfortunately, that is not always the case. An adviser can run a risk exposure review that shows how your current portfolio would hold up under various scenarios, use software to determine your true risk tolerance and get your investments in line with those findings.

2. Look at ways to optimize your retirement income sources

Retirement success is really all about finding reliable income streams and turning them on at the appropriate time.

You can start by doing some Internet and in-person research and asking questions like:

  • “How will I replace my paycheck when I retire?”
  • “When is the best time to claim my Social Security benefits?”
  • “What should I do with my pension?
  • “Should I take a lump sum or an annuity payout, and should I opt for the survivor benefit?”
  • “How can I avoid paying too much in taxes?”
  • “What will happen if I outlive my money?”

Keep in mind that the rules change when you move from the accumulation phase of your financial life to the distribution phase. Think of it like climbing Mount Everest. The majority of accidents happen on the way down. Getting to the summit (retirement) is only half of the journey. Even a minor slip could impact your retirement success, so having a plan that prioritizes safety is critical.

How a specialist can help: A financial adviser who is experienced in retirement income planning can assist you in maximizing your Social Security and pension benefits, work with you on a withdrawal plan for your investment savings and share tax strategies that can help you keep more of the retirement income you worked so hard for.

3. Protect your retirement with a comprehensive plan

There’s a big difference between having a financial portfolio and having a financial plan.

A plan should coordinate all the areas of your financial life and protect you from any threats, or what I call “plan killers,” including:

  • Market risk and the effects of volatility on your investments
  • Longevity risk and the possibility you could outlive your money
  • Inflation risk and the danger of losing your purchasing power as you move through retirement
  • Health risk and the often-overlooked (and downright scary) costs of long-term care

If you think of the various aspects of retirement like dominoes, you can see the value of using a comprehensive plan to keep one mistake or oversight from impacting other parts of your financial life. A poor investing strategy, for example, could have a negative effect on your taxes. A lack of insurance planning could have a negative effect on your income. Missing out on an important tax strategy could cost you thousands or have a negative effect on your estate plan. And so on.

How a specialist can help: A credentialed adviser (such as a CERTIFIED FINANCIAL PLANNER™ professional) can help you develop a sound financial strategy that’s designed to weather the unexpected and help you keep more of your money.

If you’re a DIY-er in other aspects of your life, you know how this works. You might replace the washer in a dripping faucet without worrying too much about the consequences. But would you try to completely replumb your home without bringing in professional help?

There’s nothing wrong with taking steps to better understand and control your retirement investments. I’m sure most financial experts would encourage it. But when you’re ready to build the plan that will take you to and through retirement, working with an experienced and knowledgeable professional — a fiduciary who is obligated to put your best interests first — could make all the difference in your success.

Kim Franke-Folstad contributed to this article.

About the Author

David Faulkner, CFP®

Partner, Spectrum Advisors

David Faulkner is a CERTIFIED FINANCIAL PLANNER™ professional with Texas-based Spectrum Advisors ( His focus is on holistic retirement planning and financial awareness, and he is fully licensed in investments and insurance.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger was not compensated in any way.

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