Entering retirement is a significant milestone in life, and it can bring both excitement and fear.
For some people, retirement means freedom — from deadlines, stress and the grind of going to work nearly every day for decades. They can’t wait to take it easy, spend more time with friends and family and do whatever they want.
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1. Have a Vision.
This seems like a no-brainer, but you’d be surprised how many people — especially couples — haven’t given much thought to what they want to do in retirement. They don’t know what their location, lifestyle or future needs and wants might look like as they age. (Just in case you’re wondering, “I want to buy a boat” is not a retirement plan.)
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2. Put a (Realistic) Price Tag on Your Goals.
Once you’ve come up with your retirement objectives, you can create a budget based on your estimated expenses, including housing, transportation, health care and leisure activities. Yes, it can be difficult to predict what some costs might be far into the future, but this exercise will help you grasp how much you’ll need to maintain the lifestyle you want — and deal with some pitfalls along the way.
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3. Create an Income Plan.
Once you have a better idea about your costs, you can create an income plan. This means figuring out all the income streams you expect to tap in retirement (Social Security, a pension, workplace retirement plans, other investments, etc.)
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4. Evaluate Your Asset Allocation.
Asset allocation is the process of dividing your investment portfolio among different asset classes, such as stocks, bonds, cash and cash equivalents. The goal of asset allocation is to create a diversified and balanced portfolio, which can help reduce risk and increase returns over the long term.
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5. Hope for the Best; Plan for the Worst.
When soon-to-be retirees dream of retirement, they typically picture themselves on the golf course, traveling or playing with their grandkids. The good stuff. But it’s important to prepare for whatever life throws at you through the years. This could mean:
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6. Don’t Forget About Taxes.
People tend to underestimate the bite taxes can take from their retirement income every year. If you have a tax-deferred retirement plan (401(k), 403(b), etc.), you’ll pay taxes on your withdrawals. You also may be required to pay taxes on a portion of your Social Security income. Some strategies can help minimize the damage taxes can do in retirement.
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7. Work With a Financial Adviser.
Can you create a do-it-yourself retirement plan? You can. But nearly every action I’ve listed here would be better managed by a professional. A good financial adviser can assist you through every step of retirement planning, from goal setting and guidance to implementing your chosen strategies. And with regular financial checkups, your adviser can help ensure your plan stays on course.
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