The definition of retirement is changing, but the need to plan remains the same.
The whole notion of retirement planning has shifted dramatically over the last generation, reflecting a number of significant changes in American society. It’s no longer common to spend an entire career working for a single company, then retiring at 65 with a gold watch and a pension to quietly live out your remaining golden years rocking on the porch.
People change jobs more frequently throughout their careers, company pension plans have largely been replaced by optional 401(k) plans, and many individuals become entrepreneurs and have to create their own plan. A focus on healthier lifestyles and better medical care has led to longer life expectancies, meaning that many people may live several decades in retirement.
Retirement itself is defying definition, especially for Baby Boomers and the generations that follow. There will be no rocking chairs on the porch for these dynamic, active and engaged individuals. Instead, they simply plan to “Rock On!”
Some will begin whole new careers in retirement, others will finally start the business they’ve always dreamed of owning, and many will find a new purpose in volunteer work. Still others will either remain in their jobs full-time well past 65, make a gradual shift to part-time work, or even take on a consulting role with their former employers.
With all of these shifts, you still need to consider the risks you may face in retirement:
- Longevity – do you risk outliving your assets?
- Excess Withdrawal Rate – will you draw down assets too fast?
- Inflation – what will today’s dollars be worth down the road?
- Asset Allocation – is your portfolio properly balanced between asset classes?
- Healthcare – will healthcare expenses potentially drain your assets?
Financial planning experts recommend the amount of money you’ll need to have accumulated is equivalent to 70 percent of your annual salary at the time you retire, for each year of living in retirement. For example, if you’re making $75,000 per year at age 65, and expect to live another 20 years past that in retirement, you’ll need: $75,000 x .7 x 20 = $1,050,000.
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So you really need to have a plan.
The most effective pre-retirement planning involves getting an early start, giving the money you invest plenty of time to accumulate and grow. The insurance products you’ll want to round out your portfolio are also more affordable if you enroll when you’re young and healthy. And once you’ve reached retirement, you’ll also need a plan for drawing on your accumulated assets so you can afford the lifestyle you desire.
It’s never too early, and almost never too late, to start planning for retirement – but the later you start, the more you’ll want professional guidance to help you get the most out of your investments, and balance risk and reward. Your First Midwest Financial Consultant has the experience to help you craft a comprehensive financial plan that will move you toward achieving your retirement goals. Schedule an appointment today to come in and discuss your retirement hopes and dreams – and plan to make them happen. We also regularly conduct free seminars on retirement planning – ask your Financial Consultant about upcoming events.
Bottom line, retirement today is whatever you choose to make it – especially if you’ve planned well enough to give yourself the broadest array of choices. You can learn more about retirement planning goals by stage of life here.
Call 800-241-1749 to get connected with a First Midwest Financial Consultant today.
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