When can I safely retire?
If you are approaching retirement age, this question may be consuming your thoughts or regular conversations with your loved ones. Related questions include:
- Have I saved enough to support my desired retirement lifestyle?
- How much can I prudently spend each year once I do retire?
- When should my spouse and I take our Social Security?
- What investments are best for my situation?
There's an inherent dilemma found in these questions and more: You know retirement planning is important, but how do you plan for something you've never done?
First off, it helps to align yourself with someone who has – a professional who knows the retirement-planning ropes, AND is committed to offering you objective advice that serves your highest financial interests (versus just pushing products and wishing you well).
Best-interest advice is also known as fiduciary advice. You may have noticed there's been a lot of talk lately in the financial press about whether the Department of Labor's Fiduciary Rule will ever be implemented. The DOL's rule would require anyone offering you professional advice about your retirement investments to always represent your best interests.
Required or not, we believe fiduciary advice should be your essential starting point. Here are a few more suggestions for your retirement-planning journey.
First off, it helps to align yourself with someone who has – a professional who knows the retirement-planning ropes, AND is committed to offering you objective advice that serves your highest financial interests (versus just pushing products and wishing you well).
Best-interest advice is also known as fiduciary advice. You may have noticed there's been a lot of talk lately in the financial press about whether the Department of Labor's Fiduciary Rule will ever be implemented. The DOL's rule would require anyone offering you professional advice about your retirement investments to always represent your best interests.
Required or not, we believe fiduciary advice should be your essential starting point. Here are a few more suggestions for your retirement-planning journey.
- Take a goals-based approach. Instead of fixating on some random number that sounds like a lot of money, make sure your specific cash-flow needs and personal goals are driving your retirement strategy.
- Manage both kinds of risk. Bear markets can be especially frightening once you retire and you're living on your accumulated wealth. But don't overlook another, equally important risk to your life savings: Inflation is virtually guaranteed to erode your money's spending power over time … unless you invest some of it in the stock market. If you pull all of your money out of the market, you'll miss out on all of the market's expected inflation-beating returns. Instead, seek an appropriate balance for your goals-based approach.
- Focus on what you can control:
a)Clearly define your retirement cash flow needs and goals.
b)Craft a strategy that will give you the highest probability to achieve your goals.
c)Build and maintain a properly diversified portfolio to reflect your strategy.
d)Revisit your portfolio and cash-flow plans periodically; adjust when warranted (by your goals-based plan).
e)Minimize excessive investment costs and tax inefficiencies. - Ignore outside distractions. Avoid reacting to sensational news you can do nothing about by riding out bull and bear markets alike. Stick to that plan.
- Understand your worst enemy (yourself). Decades of academic inquiry into behavioral finance informs us that your own, instinct-driven emotions expose you to some of the greatest risks for selling at market lows and buying at market highs … exactly the opposite of prudent investing. To earn long-term market returns, you must ignore the near-term market movements. This brings us to our last point …
- Seek objective advice to provide touchstones for your journey. A fiduciary advisor can not only help you establish your goals-based plan to begin with, he or she can coach you correctly along the way, whenever the markets take those big, uncomfortable drops, or conversely, soar into over-exuberant realms.
Bottom line, answering your retirement questions has a lot to do with proper planning. Planning converts all those hazy "what if?" questions into actionable information about what you've got and how you're going to spend it. It also gives you a clear map to follow as you proceed.
Ready to get started? Give us a call today and we'll help you put your retirement plans into focus.
Ready to get started? Give us a call today and we'll help you put your retirement plans into focus.