Contributed by: Kali Hassinger, CFP®, CSRIC™
If you’ve ever found yourself wondering, “Will I have enough to retire comfortably?” – you’re not alone. Many approaching retirement, even those with a sizable nest egg, can feel unsure about how to decide what is a safe and reasonable amount to live on in retirement. Although no two individual lives or retirements will look exactly the same, there are principles and help available that can help to provide much-needed clarity.
Start with a Plan, Not Just a Portfolio
Many people equate financial planning with investing, but that’s only part of the picture. Each client relationship begins with a financial plan. That plan requires a deep dive into your financial life – including your budget, retirement income sources, insurance coverages, estate plan, tax outlook, and, of course, your investment allocation.
Although the hard data is very important, we also need to better understand what is most important to you - your goals, lifestyle, and what you envision for yourself and your family. These deeply personal factors can help us determine what to prioritize within your financial plan.
Understand Your “Enough” Number
Shifting from savings mode to using your money for retirement can be a difficult adjustment. Ultimately, we want to know when you’ve accumulated enough to support your desired retirement. That amount can be found by running detailed retirement projections that factor in:
Desired retirement age and lifestyle
Inflation over time
Rising costs of healthcare
Social Security & Pension income
Tax-efficient withdrawal strategies
Possible portfolio returns and differing market scenarios
These highly technical (and jargony – sorry!) factors help us determine what a safe retirement spending rate and lifestyle should be based on your individual wants and needs. These numbers are just as deeply personal as your goals!
Invest for the Long Term
Making your money last doesn’t mean chasing high returns or even avoiding risk altogether. Building a retirement portfolio requires balancing several different varying factors. You want your allocation to be balanced and diversified, all while managing the risk based on your level of comfort and the level of return that your financial plan suggests is necessary.
Ongoing maintenance of the portfolio is also crucial. As asset classes and investment sectors provide different returns, your allocation can shift out of balance over time. Actively managing this breakdown, as well as your available cash, is an integral part of a well-planned retirement.
Plan for the Unexpected
Life is inherently filled with risks, such as medical events, market downturns, or family emergencies, to name a few. While we can’t protect ourselves from the unexpected happening, we can have a plan in place to address those unforeseen events. Emergency reserves, insurance coverage, an Estate Plan, and actively updating your financial plan throughout your life can help to ensure that you are in a good position to weather life’s ups and downs.
Stay Flexible and Review Regularly
As I just mentioned, updating your financial plan is just as important as the initial development process. Your life and needs will evolve, markets will shift, and tax laws will change. Having a long-term partner, such as a financial planner, who helps you stay aligned with your goals, encourages you to make adjustments when needed, and stays on top of changes that will affect your financial life can help you feel confident that your money will last. We recommend reviewing your plan at least annually, and, of course, whenever your life undergoes significant changes.
Confidence is the Objective
Financial Planning isn’t just about the numbers, although those are really important, too! Money is a necessity for all of us. We never want our clients to run out of money, but we also want them to live a happy and comfortable life. With a financial plan, you can strike the delicate balance between safely using your money to support your retirement, enjoying life now, and helping to make your money last a lifetime!
Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James.
Prior to making an investment decision, please consult with your financial adviser about your individual situation. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc®. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.
Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification.