Everyone loves planning for a vacation. You find a picturesque location, determine the perfect accommodations, and get ideas for what you’ll do when you get there. Many people spend weeks or months getting all their ducks in a row to ensure they have a great time when they arrive.
Most vacations run somewhere around one week long. And on average, people spend three months planning, about 12 times as long as the trip’s duration.
Most retirements run somewhere around 20 years long. And on average, people don’t start planning until retirement is just around the corner, sometimes only for a few years prior.
If you spend months planning for a week-long vacation, don’t you think you should spend the adequate amount of time planning for something as long and unpredictable as your retirement years?
When developing your retirement plan, there are several questions you’ll need to ask to help ensure your best vacation goes off without a hitch:
- Your Goals: When do you want to retire? What do you want to do when you arrive? You need to determine what “comfortable” means to you, and how you want to enjoy your best vacation.
- Your Number: How much will you need to reach your goals? Ultimately, we aim for about 80% of your income at the date of your retirement.
- Your Income Stream: How will you earn money in retirement? How many sources of income will you have?
If you work with a financial advisor, you’ll have many options available to you in order to meet your goals, reach your number, and set up an income stream. Your advisor should also counsel you on how to take distributions, when, and how often. As you plan for your retirement, be sure you are considering the following:
- Savings Distributions: All your savings from over the years comprise your investment portfolio, which is made up of the appropriate asset allocation for your risk tolerance and for meeting your goals. Even as you take distributions, your portfolio will continue to work for you and ideally earn returns each year. There are other investment products that also pay out distributions on a regular basis that may be available to you while you’re in your retirement years.
- Social Security: Social Security is available at differing times and at differing dollar amounts based on your personal situation. Your advisor will work with you to determine the gap between what Social Security provides and what your investments will need to cover.
- Tax Efficiency: Your advisor should be working diligently to ensure your investments are efficient on the tax side. If you work with an advisor who is also a CPA, you have an extra advantage on this element of your investments and distributions.
- Insurance: Protecting your assets is critical during your retirement years, as is anticipating the unexpected in the healthcare realm. The Medicare system is complex, and doesn’t cover everything you may encounter. Long-term care insurance may be something you want to consider. And if you don’t have life insurance yet, you may want to think about it.
- Estate Plan: Leaving a legacy for family members and loved ones is something we all dream about. Ensuring you have a plan in place to distribute your assets after you pass away is critical to ensure tax efficiency, and that your wishes are carried out.
If you can say with confidence that your retirement plan considers all of the above, we’re so glad! But the reality is that many Americans don’t know all the factors that can play into a solid retirement plan, or how much planning will help them in the long run.
In retirement, you’ll face inevitable uncertainties in the financial realm. We don’t know what the markets will do. We don’t know what will happen to healthcare costs, or your own health. We have no idea what the global and domestic political situations will be. But planning helps you protect yourself from uncertainties and prepare for the inevitability of their arrival during your longest vacation.
Cornerstone Advisers helps our clients plan for the multiple aspects of their financial lives, as well as the risks that accompany them. As specialists in the fields of retirement planning, estate planning, tax planning and more, we help families prepare for life with a solid financial cornerstone.
We’d love to help you look forward to your best vacation – your retirement. Contact the Cornerstone office nearest you for a free consultation.