Here at Magellan Financial, our aim is to help you experience a comfortable retirement. This means building a solid financial plan. Throughout our 2018 Living in Retirement blog series we’ve addressed some of the more common questions and fears that arise both before and during the retirement process. It starts with a realistic plan and continues with ongoing adjustments as you approach the finish line of your professional career.
The fact is, planning for retirement doesn’t just stop at your retirement date. It’s a continuous process that adapts based upon your current situation. The more flexible you can be during your retirement, the better off you’ll be. Here are some of the key lessons we introduced throughout our blog series this year to help you broaden your retirement options:
1. Define Your Retirement Lifestyle
To come up with a plan, you need to envision what your ideal retirement looks like. From there, you can establish the goals and actions you need to tackle. Before you can run into your dream retirement, you need to walk through the following questions:
2. Review Your Current Finances and Health
When planning for your retirement, you need to review both your current finances and the overall health of both you and your partner. Once you’ve done that, your retirement plan starts to come together a lot better. Here’s a simple checklist to get you started:
3. Create Future Income Stream Options for Retirement
The fear we hear most often is the possibility of not having enough money to live the lifestyle we imagined for ourselves in retirement. To live retirement comfortably and insulate yourself against market downturns you’ll need to establish a diverse portfolio of income streams. Here are some of the more common future income stream options for retirement:
- Fixed Annuities
- Dividend Stocks
- Municipal Bonds
- Self-Funded Pensions
- Part-Time Jobs
Read our blog to discover the pros and cons of each option and how each has the potential to give you added financial flexibility during retirement.
4. Know When to Start Taking Social Security
One of the most important considerations in retirement planning is deciding when to start receiving your Social Security retirement benefits. Getting the timing right is critical to maximizing the benefits accrued during a lifetime of work. The following chart illustrates the higher income streams that can result from delaying your Social Security benefits:
5. Revisit Your Retirement Plan – And Determine Whether It’s Realistic
These days, many people wonder if they will ever reach retirement. Instead of wondering if you can afford it, we want to help you learn how you can. Since you may have more control over your spending than other aspects of your financial situation, you could consider making these changes as early as possible:
- Try to reduce high-interest debt as quickly as possible because your debt payments will eat into your savings and income.
- You may want to get your house paid off before retirement; but again, work on the high-interest debt first.
- Prioritize retirement planning, even if it means you have to limit gifts or risky loans to your children and other family members.
- Consider downsizing your living arrangements if a move could save you money.
- Look into other cities with lower costs, particularly medical costs, that might help you stretch your budget during or even before you retire.
6. Prepare for the Unexpected
One challenge of retirement planning is trying to predict events that could happen many decades in the future. That’s why good retirement planning includes a plan for unexpected – but common – retirement events. Sensible strategies like having an emergency fund, diversifying your investments, and insuring your retirement can help you prepare for most contingencies.
7. Plan for Retirement Each Decade
You have a great chance to achieve your retirement goals if you treat retirement planning as a long-term project. When you start saving young, you can keep reinvesting gains and earning compound interest that adds up over the years. Basic tips include the following:
- Get started in your 20s by paying off debts and contributing to your 401K
- Plan for your family in your 30s by ramping up your 401K and starting a 529 plan
- Refocus your plan in your 40s to ensure your retirement savings come first
- Pay your mortgage and make catch-up contributions in your 50s to prepare
While you can always enjoy benefits from starting your retirement savings early, you should also consider adjusting your savings plan to conform to your age. If you’re not sure how you should approach retirement savings, consider some strategies that tend to work well for people in different stages of their life.
8. Cut Expenses to Attain Your Retirement Lifestyle
If you discover that you’re not keeping pace to achieve your retirement goals, you still have plenty of options. But before setting a new course, see if you can find ways to reduce your current expenses so you have the chance to invest even more money into your future retirement lifestyle.
9. Create Your Final Retirement Budget Using Simple Steps
Planning is dynamic. While it’s impossible to predict everything that could happen over the course of decades, you can control your spending if you take the time to understand it. Learn how to adjust your goals as you go to align with your financial situation. It starts by understanding how spending changes as you enter retirement, as illustrated by this graphic:
Instead of forcing you to become rigid during retirement, a solid budget will truly give you more flexibility to adjust your lifestyle and reduce stress because you won’t be tempted to overspend on things that don’t offer you a great value.
10. Estate Planning for Retirement
As you approach the finish line, you need to protect yourself and your legacy to ensure that your assets can be passed on to your loved ones with as few headaches as possible. Make sure you’re at least doing the following:
- Update key financial information like usernames, passwords, and beneficiaries and ensure that your will is up-to-date
- Optimize your estate tax situation by invoking personal and charitable trusts and converting high-tax accounts to better options
- Contingency plan for your care by considering a living will and the best person(s) to serve as your healthcare proxy and power of attorney.
Living in Retirement Series Wrap-Up
You might hear a rare story about somebody who retired well because of a lucky twist of fate. But in almost all cases, you need a good retirement plan that includes reasonable goals, a budget you establish long before retirement, and the options to remain flexible.
If you’re ahead, behind, or haven’t even thought about your retirement plan, we want to help you. The earlier you call upon us for help setting goals and defining a pre- and post-retirement budget, the easier time you will have. Get started today by sending us an email to tell us about yourself, and we’ll show you exactly how we’ve helped similar people achieve their retirement goals.
The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.