No two retirement plans will be exactly the same. However, the best retirement plans are crafted by taking into account not only a person’s unique circumstances and goals, but also the changes in pertinent regulations and policies.
In the past, a solid retirement involved three main income sources which include social security, lifetime income and a person’s savings. However, recent developments have seen the rise of 401 (k) plans as a substitute for other benefit plans.
In turn, this has led to the increased responsibility of a person in creating a retirement income source. Couple this with other trends like increased life expectancy and increased costs, and the need for a sizeable income source becomes more urgent.
But how exactly do expert retirement advisors craft a suitable retirement plan for their clients? Here the steps involved.
Definition of goals
In order to retire comfortably in your sunset years, it is not enough that you set vague goals for yourself. To be able to craft a solid retirement plan, you need to have a fair idea of how you will live out your sunset years.
That will entail asking yourself a few critical questions. For example, do you wish to completely retire or do you wish to continue working? Where do you plan to retire and how do you envision yourself living your retirement years? Are there specific things that you want to pursue or accomplish?
For many people, identifying retirement goals may seem like a far-fetched idea. However, as you near retirement, your goals will become more concrete and well-defined. At this stage, your chosen goals should guide you in making investment decisions.
Determining how much you will need during retirement
Traditionally, retirement planners have calculated retirement costs to be somewhere between 70 to 80 percent of a person’s income prior to retirement. This figure is seen to suffice to when it comes to maintaining a set standard of living.
However, this old model fails to account for advances in medicine which have helped increase lifespans, as well as healthcare costs. Today, expert planners recommend taking into account an individual’s needs and lifestyle goals as well as earmarking a part of the budget for unexpected expenses.
Developing a risk profile
Market volatility (along with the low returns offered by some investment platforms) is one challenge that individuals and their chosen retirement planners should be keenly aware of.
One solid step that will allow you to rise against this challenge is to establish and develop your risk profile based on your risk tolerance. By taking into account your tolerance for risk, you can better choose which assets to add to your portfolio and allow yourself to protect some of your investments against market volatility.
Minimizing the impact of taxes
In the past, the model used by most retirement planners revolved around the accumulation of capital for their clients through platforms like the 401 (k) plan and the IRA.
However, you have to be aware that when you withdraw from these funds, you will be taxed like ordinary income. In order to cushion against these, your retirement planner may recommend using other tax-free income sources and investment platforms which can help make your retirement plan last longer.
Your next step…
Give us a call today at 410-435-3270 or click here to schedule online, to discuss the best retirement plan for you and your family.