How long you have until retirement does not only affect how much you need to put away and invest.
You also want to make sure that your retirement plan accounts for inflation and distributions, and the impact that they may have on your portfolio once you are in retirement.
It can be very easy to miss calculate how much distributions can have on the long term well being of your retirement plan, and how much inflation can affect their value.
Some people think that taking out 10% every year will not bring down the principal, as investments have gained approximately 10% annual returns historically.
When investing it is never a good idea to think that the average is normal.
Although certain markets may annualize approximately 10% over time, your investment returns can vary greatly over time.
When you take the same money out of your retirement account during market ups and downs, you can greatly decrease the expectation of keeping your principal.
Inflation can also greatly affect your retirement account. It can decrease your buying power over time and takes away some returns.
The effects of inflation can be very small and take a long time, which causes many people to not include it in their retirement planning.
When creating retirement plans, people often also do not consider the impact of inflation and taking out cash.
This can affect how your retirement plan performs in meeting your long-term goals.
Income In Retirement
You also want to take into consideration any other sources of income that you will be receiving in your retirement.
This will greatly affect the decision-making when you are planning for your retirement, in which investments are best for you and your long-term goals.
For example you want to consider if you will still be working and earning income, any pensions that you and/or your spouse will read be receiving, Social Security income, and any other business or real estate endeavors.
When you take the total money that you are bringing in, and then you subtract all of your expenses, this number is your net savings.
If this number is negative then your retirement portfolio has to generate the cash flow to cover the difference.
We make sure to take this into consideration when working with our clients and going over their retirement plan.
This can greatly affect which investments are best for your specific situation.
Here’s Your Next Step
Are you ready to put a comprehensive retirement plan in place to help you achieve your goals?
If so, give us a call today at 410-435-3270 or click here to request your appointment online.