Which Retirement Planning Stage Are You In?

Are you near retirement age and unsure of your options? That’s understandable as many retirees feel this way. However, you should be aware of the actions that can be taken depending on your preparedness in retirement planning.

For example, if you feel clueless about long-term retirement success, start with the basics like determining inflation-adjusted expenses.

Conversely, if you have significant confidence in your retirement preparedness, consider other important actions like tax minimization. Use the following guide to help determine which steps to take based on your status.

Clueless About Retirement Planning

You’ve considered retirement planning, but are unsure of where to start. It’s OK to feel this way, and you can begin with these fundamental steps.

1. Determine Your Monthly Expenses

A simple way to determine your expenses in retirement is by working with a financial advisor. Our Richmond, VA financial planning firm offers expense and income projections as part of our clients’ retirement plans.

If you are more of the DIY type, you can use an Excel spreadsheet or budgeting software like Mint.com.

During this step, classify both necessary and frivolous expenses. That way, you can determine the amount needed to survive vs. the amount that will sustain your desired lifestyle.

2. Calculate Your Monthly Income

Income can come from many sources, including Social Security benefits, investments, rental properties, and even an inheritance.

Retirement income types can vary, with some sources being a fixed sum like a one-time inheritance. Others can be a recurring income stream, like a pension plan.

3. Compare Your Monthly Income to Expenses

If you have a deficit, look into ways to reduce spending or increase income. A simple, but overlooked way to increase income is by having a part-time job.

Many retirees have part-time jobs or consult for additional income. This can not only help relieve financial stress, but also ease the transition into retirement.

Might Be Able to Retire

This is the “middle ground” between being clueless and confident about your retirement plan. You might have a ballpark estimate of income, expenses, and other fundamental figures; however, you still need to fine-tune your plan.

Consider evaluating the following:

1. Asset Allocation and Rates of Return

Having income isn’t enough, as inflation will erode your purchasing power. Simply put, your money won’t buy the same amount of goods and services decades from now.

At the same time, you want to be aware of market volatility to prevent excessive losses to your investment portfolio, as seen during the 2008 recession. Therefore, consider working with a retirement planning specialist to determine your asset allocation along with projected rates of return.

This simple act can help you adjust your investment allocation for long-term success.

2. Have A Buffer or Emergency Fund

It’s not a matter of if, but when, the unexpected happens. For example, your car might break down, or you could have problems with large kitchen appliances.

Thus, be sure to allocate part of your reserves to liquid investments, like savings or money market accounts. Having liquid accounts will allow you to easily access money without additional taxes or penalties.

Confidently Have Retirement Income Sources

If you feel confident about your retirement planning, pat yourself on the back! You’ve done most of the work, but still consider reviewing tax and estate planning strategies.

1. Taxation

Taxes can have a large impact on investments, and there are different rules for various accounts. For instance, you have to pay higher ordinary taxes each time you withdraw funds from pre-tax accounts like IRAs or 401(k)s. On the other hand, funds in Roth accounts can be distributed tax-free.

Therefore, some retirees choose to do Roth conversions, meaning they convert portions of funds in pre-retirement accounts to a Roth. Roth conversions can reduce taxes, but they come with rules too. Be sure to consult with a financial planner first.

2. Estate Planning

Wills and trusts are important documents used to properly pass down assets to beneficiaries. We’ve noticed most clients haven’t updated their documents in years.

Don’t fall into this trap. Be sure to review common documents like wills and trusts to ensure accuracy. It’s especially important to review them after major events like births, deaths, marriages, and divorces.

The Bottom Line

It can be daunting to consider all the important retirement planning steps. Yet it’s wise to break down each action into small chunks to prevent being overwhelmed. You can use these three main retirement planning preparedness stages to determine the most important processes based on your needs.

Feeling stuck? Schedule a complimentary 30-minute phone call to discuss your personal situation with a financial advisor.


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The information contained in this presentation does not purport to be a complete description and is intended for informational purposes only. Any opinions are those of the content creator and not necessarily those of the named advisor(s) or JWCA. This information is not intended as a solicitation or an offer to buy or sell any security or investment product. Information is solely intended for recipients in jurisdictions where the named advisor(s) are licensed to engage the investing public. Investments and strategies mentioned may not be suitable for all investors. The S&P 500 and other such indices are unmanaged, do not incur fees or expense, cannot be invested into directly and individual investor’s results will vary. Past performance is no guarantee of future results. As with all investments, various risks may exist and JWCA recommends you consult with your financial advisor prior to making any investment decisions. Advisory Services offered through J. W. Cole Advisors, Inc (JWCA). Financial Dynamics & Assoc. Inc and JWCA are unaffiliated entities.