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Preparing for Retirement - Part 2

Preparing for Retirement - Part 2

| November 08, 2023

Last week, we talked about the goal of retirement planning, the longevity factor, and maintaining the purchasing power of your dollars. This week, based on our new understanding, we will talk about the very first thing that you need to do when you start planning for retirement. Like planning a journey from point A to point B, your retirement plan needs to have a starting point (point A) and an endpoint (point B) to aim for.  

As your starting point, I suggest taking an inventory of your retirement assets. Your inventory should include, not only the investments that you currently own but also what income you will be entitled to from Social Security and pensions during your retirement. You will also need to estimate how much you plan to add to your investments between now and when you retire. 

As the end point, you should have a vision or dream of what your retirement lifestyle will look like. The tough part is to estimate what that lifestyle will cost, at least in today’s dollars. 

Variables in mapping your journey from A to B is to decide what annual rate of return on your investments is reasonable. If you choose a high rate of return, your number might look good, but you may need to take on too much risk to pursue that level of return. If you choose a very conservative assumption, you may run the risk of your assets being depleted during your life expectancy. 

I know this may seem overwhelming, but let’s start with the end goal in mind. The end goal of all this is to come up with your retirement number. This is the amount you need to fund the retirement lifestyle you want. And there is a specific formula for how to do this that I will share with you next week. Once you have that number, you can remove the panic and doubt because you will then know how far away from your goal you are. In next month’s blog, I’ll share ways to help you achieve that number that are much easier than you think!

However, for this week I want you to think about the following questions:

What do you expect of your retirement?

What will you need to retire the way you want to?

What retirement savings do you currently have?

What are your financial liabilities?

Once you have this list, you have all the components you’ll need to input into the formula I will show you next week. 

Until next time…

One last thought: We believe an educated investor is an empowered investor. If you like what you’ve read and think your friends and family can benefit as well, please share.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. 

All investing involves risk, including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dollar-cost averaging involves continuous investment in securities regardless of fluctuation in the price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.