Planning for Retirement

You have worked hard and saved your entire life. How can you make your money last in retirement?

Step 1: Visualize the lifestyle you want in retirement

You need to paint a picture of what your retirement will look like. What is the lifestyle that you want to live? Where do you want to live? How do you want to stay active? What type of legacy do you want to leave?

Step 2: Make a budget

The next step is determining your spending needs. Write down a list of your daily living expenses. This cash flow analysis will help provide you with what your monthly expenditures will be. This analysis needs to be thorough and it is best to work with a Certified Financial Planner™ to compile this list. A good online worksheet calculator can be found here.

Step 3: Determine your cash inflows

This income typically includes Social Security, pensions, dividends, annuity flows, retirement account distributions, and general savings spend down. We recommend that you speak with a Social Security specialist before you make this decision. There are multiple strategies that you can take to maximize your benefits.  The Social Security website has online calculators if you want to do it yourself.

Step 4: Construct your portfolio

Asset Allocation and diversification is critical to staying retired once your retired. The most common mistake is only considering stocks. The proper asset allocation may include real estate, stocks, bonds, annuities, artwork, mutual funds, life insurance policies and exchange-traded funds. It is critical that you understand that you can’t control market returns, inflation, taxation, and other government policies. However, you can control your portfolio risk and the income that you will need. In my experience, a Chartered Financial Analyst (CFA) is the most qualified investment professional to help you with this step. Trusting a CFA, who is an asset allocation specialist, is equivalent to trusting a cardiologist to work on your heart. In my opinion, you need to work with someone who is an experienced investor and understands markets. Interview multiple advisors before you make your final decision. Do not trust the internet or a computer to provide you with this type of advice.

Step 5: Monitor for changes

Markets change and so will your budget in retirement. You need to continuously monitor the first four steps and make adjustments. Work with a financial advisor that can help keep you on track. The main question that you need to determine is how will your asset allocation change? This is a tricky question and needs to be addressed before you begin spending. Your personal risk profile will help answer this question. How much loss can your portfolio withstand? How can you manage downside losses in your portfolio? Again, you need a professional who can actively monitor markets and do their best to adjust your portfolio accordingly.

Other key considerations

We believe that it is in your best interest to create an entire estate plan as you enter retirement. Working with a Certified Financial Planner™ and estate attorney will help you to solidify steps 1-5. Most important, an estate planning takes into consideration saving on taxes, protecting your assets, and insuring your assets are used for your benefit. Trusts are not just for the wealthy. A well written trust will help eliminate concerns and give you peace of mind.

Mitch is a Certified Financial Planner™ and Chartered Financial Analyst whose passion is investing and helping others achieve their financial goals. Give us a call to schedule your free consultation and we can help give you peace of mind.

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Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

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