5 Simple Steps to Retirement Planning Success
Develop a Workout Plan
Retirement planning is full of uncertainties. The biggest question I get is, "Am I doing enough?" That's when you need to do the math and decide what are your priorities. Perhaps you have some catching up to do or you may be on track. You can develop a workout plan to get the facts and help you succeed. Make a plan and commit to it, after all it's your money and your future.
Strengthen and bulk up your savings
Save more, at least 10% of your income. Ever hear of the theory of paying yourself first? Make it an automatic habit to pull out 10% for savings and investments for retirement, before you pay any other bills. This 10% can include your 401(k), 403(b), 457 plan, IRA's and more. Be sure you are maximizing these pre-tax options (including Catch-up provisions) and any company matching contributions.
Look beyond your 401(k) if you can. The highest- paid workers actually contribute a smaller portion of income to 401(k)'s because they maximize contributions. You can also run into limits on IRAs, there is a backdoor: Contribute to a nondeductible IRA then convert to a Roth IRA. (Caveat: If you have other IRAs, tax treatment can be tricky.) Consult an experienced and savvy IRA planner.
Tone up your portfolio
Having a well rounded portfolio is key to your success. Has your portfolio ever been stress tested to see if it has endurance? Many advisors recommend options from the limited menu of their firm. This includes those "big" mutual fund companies that advertise so heavily. Yes, they offer mutual funds; however, there may be other options that you should include and they won't tell you because that's all they are promoting.
A real "fiduciary" is always looking out for your best interest and will recommend what's best for your specific goals from the universe of financial choices.
Your retirement income will have to adapt to tough markets. Unless of course, you have a guaranteed pension plan. Explore your options if you don't have a company pension plan, build your own. When you get to the finish line, do you really want to be aggressive with your life long savings?
There are many ways you can create your own pension plan. I call this your P.I.R., paycheck in retirement. Where will your paycheck come from when you retire? Social Security may be one option. On average, this will supply about 35% of retirement income needs. Your income plan needs to adjust to any surprises, such as market downturns or unforeseen medical costs. Your personal savings and investments will have to fill this "retirement income gap."
Great Financial Health - Be Fit Financially
Just as you want to be healthy from a physical standpoint, you want to reach and maintain great financial health. When we figure on inflation, the C.P.I. (consumer price index) is an average 2-3%. However, health care cost inflation is an average of 6.5% and education inflation is 7-10%.
This may be raising your blood pressure! The challenge is to get your financial health in great shape, so you don't have to stress over money. Certainly you must have other objectives when you retire, like travel to places you've dreamed of going, starting a new hobby or spending time with grandkids. You want to spend your time on the things you love, with the people you love.
I have never had a client tell me they wanted to spend their retirement years