If the past year has taught us anything, it is that so many things in life feel “out of our control.” The COVID pandemic certainly has dominated life for the past 16 months. However, stock market volatility, unpredictable weather in all parts of the country, social unrest and a political climate like we’ve never seen before are just a few things that have made life for many more uncertain than ever.
For those preparing for or already in retirement, this can seem even more pronounced. You work hard for many years and begin dreaming of the possibilities for this next phase of life, all while watching things around us happen without much clarity or certainly. Not knowing how the events of today will positively or negatively impact retirement, can be a significant source of stress and worry for those not properly prepared.
It’s more important that, while you dream of the freedom and independence that retirement could bring, you stay focused on three things you can control. I call them the three P’s of your retirement: Philosophy, Process and Planning.
Take time to reflect and understand your own philosophy about what your financial life will be about during those golden years. If you’ve been a diligent saver and good steward with money, will life just be about having an uncoordinated basket of investment or insurance products, hoping they will grow enough to last long into the future? Will you continue to have an investment-only focus, where happiness in retirement will be dependent primarily on positive market returns?
Compare that to having a mindset focused on retirement strategies such as preservation, distribution and coordination. Don’t get trapped into a belief that your investments, no matter how much you have saved, are a RETIREMENT PLAN. Make sure your philosophy is about being comprehensive and holistic when considering all areas of your financial life.
Now that you have begun to shift your mindset from one of “accumulation” to that of “distribution and preservation,” it’s time to determine what your process (or your financial adviser’s process) will be to implement retirement strategies that will help mitigate all types of financial risks as we age.
Designing your retirement “blueprint” should not feel overwhelming, complicated or confusing. Trying to design and implement strategies for all areas of our retirement, such as income, tax, health care and estate planning, can be intimidating and cause us to avoid having the right conversations. Quite often, it leads us back to focusing only on those things we feel comfortable with, such as our investment accounts and fixating on the market.
The process for creating your plan should be systematic, go step by step, brick by brick, addressing each of these areas one at a time. This will seem so much less intimidating and increase the likelihood you will keep your focus of having a comprehensive, holistic and coordinated retirement.
No matter how systematic your process, the planning you do should be retirement “specific” and “customized” to you. Do not settle for using generic retirement rules and outdated advice. Realize that accumulating your wealth is significantly different than preserving and distributing your wealth. Many areas of your financial life go from being “automatic” or “set it and forget it,” such as investing or creating monthly income, to needing a more active approach.
Something as popular as the 4% rule, which came to be in the early 1990s as a suggestion for the best way to make your money last throughout retirement, is no longer applicable and just a lazy approach to creating retirement income.
Other common considerations and decisions that need to be customized to you and not generic are things such as:
- When to begin Social Security benefits.
- Roth conversions.
- Using tools properly, such as annuities and life insurance.
- Establishing an estate plan that accounts for many of the “what ifs” in life.
Too many considerations about retirement to list here should be customized and specific to give you the best opportunity to live the retirement you want to live.
As the world we live in continues to feel out of control, take a deep breath, a few steps back, and focus on these 3 P’s for an AMAZING RETIREMENT!
Investment Advisory Services offered through Trek Financial, LLC, (Trek) an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 21-115.
Nicholas Toman, CFP®, is a lead retirement planner and investment adviser with Empowered Financial Management (opens in new tab), a firm that specializes in retirement planning for those individuals within five to seven years of retirement or who have recently retired and no longer wish to serve as their own financial adviser. Nicholas is a graduate of the University of Wisconsin-Whitewater with a BBA in accounting and has been a Certified Financial Planner since 2014.
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