Are You On Track for Retirement?
If youâ€™re over the age of 60, talking about retirement planning usually elicits one of two emotions: Youâ€™re either bordering apprehension or exhilarated about your approaching retirement.
Which group do you fall into? Letâ€™s take a look at both.
Your age is now north of 60. Retirement is up the road just a little further, but youâ€™re extremely apprehensive because youâ€™re behind where you should be when it comes to money saved.
Maybe youâ€™ve been grappling with debt, with any extra money earned going towards paying down what you owe others. Perhaps youâ€™ve been coping with a volatile career which has led to lower-than-expected career earnings. Maybe various life events have caught you by surprise and caused your expenses to dramatically increase or income to dramatically decrease.
No matter the reason, if you now associate retirement with anxiety and uneasiness, what should you do?
Save your seat for our complimentary webinar, “Retirement Planning Essentials in Your 60s and Beyond.” We’ll expand on topics discussed in this article on Thursday, July 8 @ 11am MT!
If youâ€™re in this group, youâ€™re eagerly looking forward to retirement. All your debt is long gone. Or if you do have debt, itâ€™s a small percentage of your overall wealth. Speaking of wealth, youâ€™ve got plenty of money stashed away in your savings and brokerage accounts.
Now that youâ€™re in your 60s, the question isnâ€™t if you can retire, itâ€™s when do you want to. You could call it quits tomorrow if you wanted to! But you might have a job or business thatâ€™s still humming along, providing a nice chunk of added cash to your portfolio every month.
Is there any retirement planning left to do if everything is seemingly roses and rainbows?
Financial Planning Is Still Vital For Both Groups
If youâ€™re in the apprehensive group, do not fear. Hope is not lost. A retirement filled with contentment is still within your reach. You do, however, need to create a retirement plan and do your best to stick to it.
If youâ€™re in the exhilarated group, do not let your guard down. Youâ€™ve worked hard to get to where you are. You need to continue working hard so you can face any adversity that may come your way at any time.
When putting together your retirement plan, here are several risks you may encounter that are relevant to both groups:
- Longevity risk â€“ You will outlive your wealth and available income.
- How to plan: Increase personal savings and investments. Consider supplementing government programs with lifetime annuities.
- Entitlement risk â€“ Government programs such as Social Security and Medicare may not offer sufficient resources.
- How to plan: Increase personal savings and investments. Build a retirement plan to model these scenarios.
- Excess withdrawal risk â€“ You may withdraw assets from retirement accounts too quickly.
- How to plan: Create a realistic retirement budget based on available assets. Revise budget as your portfolio increases or decreases.
- Market risk â€“ Losing invested wealth either temporarily or permanently.
- How to plan: Have a proper asset allocation and diversification for your retirement portfolio. Consider Monte Carlo simulations in your retirement plan projections.
- Lifestyle risk â€“ There may not be sufficient income to maintain your desired standard of living.
- How to plan: Be disciplined with saving enough money for retirement, along with proper budgeting.
- Asset allocation risk â€“ Investing not according to your risk tolerance and not diversifying.
- How to plan: Consult an experienced, knowledgeable investment advisor.
- Sequence of return risk â€“ Receiving low or negative returns during the early years of retirement, which ultimately leads to outliving your money.
- How to plan: Consider alternative sources of retirement funds. Consider Monte Carlo Similulations in your retirement plan projections.
- Inflation Risk â€“ Rising costs may undermine purchasing power.
- How to plan: Manage this risk through your portfolio. Consult an experienced, knowledgeable investment advisor.
- Medical expense risk â€“ Paying for the rising cost of health care.
- How to plan: Increase your savings and consider long-term care or asset-based long-term care solutions.
- Tax risk â€“ Rising taxes or unforeseen tax consequences.
- How to plan: Consult a tax advisor before retirement. Consider using tax-deferred and tax-efficient investment solutions.
- Personal or event risk â€“ Unexpected change in family circumstances such as death or divorce.
- How to plan: Have a large enough emergency fund.
- Incapacity risk â€“ Deteriorating judgment resulting in loss of control over finances.
- How to plan: Prepare proper legal documents prior to retirement and update as needed.
Reminder #1: Get rid of your debt! Many people over the age of 60 carry some type of debt. Sometimes a life event surprises you and charging a credit card is the only option available to handle the expense. Maybe you have everything paid off except your mortgage. Or perhaps you had all debt paid off, but a new car caught your eye and now you have monthly payments again. If you are able, pay off all debts so you can use your money to invest and grow your wealth instead of meeting monthly payment obligations.
Reminder #2: Continue to maximize your income. If youâ€™re still a full-time employee, consider whether you can do some consulting on the side (as long as it isnâ€™t a conflict of interest with your current employer). Many employees transition from employee to independent contractor after accumulating enough experience to strike out on their own.
If you wish to remain as a full-time employee, continue to reach for promotions and opportunities to showcase the value you can bring to your employer.
If you own a business, continue growing your business while delegating as much of the day-to-day operations as possible to employees. Now is also the time to begin putting together an exit and succession plan if you havenâ€™t already done so.
Reminder #3: Donâ€™t worry if youâ€™re behind on savings! Never regret what you did or didnâ€™t do in the past. If your retirement savings is behind where it should be, start today to save the amount of money you need to retire as quickly as you want to. You have the ability to use the catch-up clause and contribute above the normal limit to your retirement accounts. Need to work a couple extra years? Then just do it. You might be surprised how quickly you can build up your investment portfolio. Semi-retirement is also an option where you work part-time or do some consulting for 20 or so hours each week.
No matter how approaching retirement makes you feel, consider touching base with a trusted financial advisor to map out your next steps. If you have any questions about retirement planning or mitigating retirement risks, please contact Paul Madrid, REDW Wealth Principal and Practice Leader.
And donâ€™t miss our complimentary July 8 webinar! Details belowâ€¦
For those who are nearing or already in retirement, wealth advisors of REDWâ€™s Wealth Management practice will cover the many considerations essential to maintaining your financial well-being at this stage of life. From Social Security and taxes to estate planning, youâ€™ll learn steps you can take to reduce your retirement risk and truly enjoy those â€œgoldenâ€ years.
If youâ€™re preparing to or have already entered your hard-earned retirement years, this is a talk you wonâ€™t want to miss!
Thursday, July 8 @ 11 am MT