Am I doing everything I can to prepare for a successful retirement?
It used to be easy to prepare for retirement. You worked hard, you saved, and when you were ready to retire you bought municipal bonds, you had a pension and Social Security. Together, the income from these sources allowed you to retire with confidence and to live comfortably and securely.
Today it’s much more challenging. At retirement, one or both of you will probably live at least into your mid-to-late 80’s or even well into your 90’s. That’s 20-to-30 plus years that you’ll live through inflation, rising medical costs, and increasing taxes. If that’s not enough, the investment rules of the past seem more like the investment myths of today.
As you begin to think more seriously about retirement, there are a lot of questions that can keep you up at night:
* When can I retire?
* How big a portfolio will I need?
* Will I run out of money?
* How much income will I need?
* How do I keep up with inflation?
* How will the next big drop in the market affect me?
Today, to retire with confidence, you need a plan.
You need a plan!
What are your dreams? How do you imagine your future? What’s really important to you and your family?
Creating a plan for retirement is more important now than ever before. A properly thought out plan will help you sleep at night knowing that you’re making the right choices to prepare for a comfortable and secure retirement.
With the right plan you can:
* Enjoy family
* Create security
* Protect your lifestyle
* Live the life you want
Here’s how to create one.
A truly effective plan should focus on the following steps:
1 An understanding of how much income you will need
2 An income plan to reach that goal
3 A growth plan to keep up with inflation, provide security and leave a legacy
4 A focus on reducing, controlling, and transferring risk every step of the way
Step # 1, How much income will you need?
The first step in creating your retirement plan is to understand how much income will you need to retire…and to stay retired.
What does your lifestyle cost right now?
You’ve worked hard to get where you are today. Think for a moment about what your lifestyle costs. On a monthly basis, how much do you spend?
What will your lifestyle cost at retirement?
Between now and the time you retire, inflation will push the cost of your lifestyle higher. In all likelihood, it will cost you much more to live in retirement than it does today. It’s a common misconception that your cost of living will go down when you have to get rid of work-related expenses, but for most couples, this is offset by needing more income for travel and enjoying your growing family (think grandchildren). Later, when age slows your travel plans, healthcare expenses tend to increase.
What dependable income will you have coming in at retirement?
Pensions are becoming more and more scarce, and if you own your own business or profession, they simply don’t exist. What does exist for most couples is Social Security income, and for most, this is considerably less than what they will need to live comfortably.
How much additional income will you need?
The difference between what you’ll need at retirement to live well and the amount of your Social Security income is your Retirement Income Gap. This is the income that your portfolio must make on a dependable and secure basis in order to be able to retire.
How much additional income will you need to keep up with inflation during retirement?
With increasing longevity, your retirement income will need to keep up with inflation for as much as 20 to 30 years or more! This additional income needs to be created by your portfolio in order to stay retired.
Step # 2, Planning for Income
The second step in your retirement plan should be creating income to fill your Retirement Income Gap. This income-generating portion of your portfolio serves as the foundation of your retirement plan. It must produce income that is dependable and as close to guaranteed as possible. By building this foundation, you’ll create a pension-like income for a comfortable and more secure retirement.
Step # 3, Planning for Growth
The third step in creating your retirement plan is creating a growth portfolio as a portion of your overall plan. Your growth portfolio allows you to keep up with inflation, create security, and leave a legacy for your loved ones. You must use the best institutional money managers available, and focus not only on growth but also on controlling expenses and on reducing risk. Your goal is consistent conservative growth throughout retirement.
Step # 4, Focus on reducing, controlling, and transferring risk
Retirement lasts a long, long time. In every move, you make in planning and living your retirement stay focused on reducing, controlling, and transferring risk. A lot can happen both positively and negatively before and during retirement. The aim of a great plan is to be able to live a stress-free retirement no matter what life throws at you.
Are you on the right track to retire? Are you doing everything you can? The key to preparing for a stress-free retirement is to create a plan now that defines how much income you will need, that creates the income necessary to protect your lifestyle, that creates growth to stay up with inflation and that reduces, controls, and transfers your risk.