Retirement Planning - funding your future
For most investors, the target of their investments is retirement. IRAs, 401k’s, and pensions, among other vehicles are specifically designed with retirement in mind. Retirement planning is at its core just financial planning for a specific stage of life. Retirement planning should begin when you are very young. But what if you did not begin in your twenties, thirties or forties? For an investor who is either about to retire or is already retired there are steps we can take to get your portfolio on the right path, so that your portfolio is heading towards your retirement goals.
At your initial interview we would first analyze your monthly expenses. Only after establishing a picture of your ideal expenditures (your preferred standard of living, any vacation or traveling goals, etc.) would we consider your income. This approach allows us to arrange your finances to your lifestyle, instead of the other way around. If there is a deficit between your non-financial asset income (Social Security, Pensions, part-time job, etc) and expenses, this deficit needs to be filled by income from the financial assets. These would include IRAs, IRA Rollovers, bank accounts, brokerage assets, and annuities among others.
We then determine what a reasonable rate of income would be for your assets. Our final step is to discuss your investment options based on whether or not this income rate fills the deficit.
Important to keep in mind: The enemy of the retired investor is inflation. As inflation creeps higher and higher, your income’s buying power declines. It is crucial that you structure your income to grow, even if your income is higher than your expenses. Eventually your expenses may catch up to your income due to rising inflation.
Many advisors see fixed Income investments as the “right” investment for many retirees and for some they are. But having your income fixed can lead to a decline in buying power caused by inflation, which can erode the value of your investment portfolio.
The solution is to build a portfolio of investments that have the ability to increase their income. There are a variety of investments with which to build such a portfolio, each with its own associated risks.
The balance between safety and income is important. We have seen too many retirees sacrifice future income growth for current principal safety. This can cause them to have to eat into their principal and deplete their investments. Principal safety is important, but it usually has to be balanced with income growth.
If structured correctly your retirement plan should provide you with a lifetime of income. Please contact us today to schedule your retirement consultation.