A retirement plan analysis is quite simply an examination of your current financial plan. It is designed to determine if you are on a path to realize your goals for retirement. Part of the retirement plan analysis is to check if you have a 401(k) plan and if your contributions are on track. Other areas of a retirement plan analysis include when you can comfortably retire, your Social Security benefits, investment strategy, as well as budget and savings.
Certified Financial Planner
While there are some people who perform their own financial plan analysis, in my opinion, it is not recommended. Just as you would not perform surgery on yourself, you need to have an experienced and qualified financial planner help you. In fact, I strongly urge people to have a certified financial planner to help review your current retirement plan. Whether you have a robust financial plan or no plan at all, it’s advisable you have a financial planner to help you determine when you should retire, how much you need to retire, budgeting, saving, and most important your investment strategy. Investing today has changed over the past several years, which is why I urge my clients to look for a certified financial planner who is well versed in asset management advice, both traditional and multi-asset class investment opportunities.
Before I offer specific retirement advice, let me repeat a mantra that I tell all my clients: The earlier you prepare for retirement, the better off you will be. Retirement often creeps up on us and if we are not careful, we find ourselves saying, “where did all the years go.” Below are some concrete steps that reflect my opinion on retirement advice:
- Monitor your investments prior to retirement and avoid overspending.
- You need to account for inflation as an inevitable fact of life. When planning for retirement, it’s advisable to plan for inflation as part of your strategy.
- While this is not an easy conversation to have, you need to talk with your spouse or significant other about retirement spending. During pre-retirement, it is critical that you both cut out any unnecessary spending.
- Not everything about retirement planning is about money. You need to focus on your physical health. As we get older, our physical health declines, which increases health costs. If you want to avoid sudden health costs that can potentially undermine your retirement planning, make sure you take care of your health.
- Create a budget and stick with it.
- Most importantly is that you need to sit down with a qualified and experienced professional advisor who will help you become fiscally healthy.
- Watch travel expenses during retirement. Many people dream of traveling when they retire, but that only eats away at your retirement goals. It is best to do much of your travelling prior to retirement.
- If you can work longer, you will increase your chances of having a more comfortable retirement. For example, people who retire at age 70 will get a larger Social security check than those who retire at age 66. That’s extra money for life in your pocket.
Targeted Investment Advice
As the name implies, targeted investment advice is focused on your specific needs and circumstances. Let’s remember that retirement is not a single event, but an ongoing process. I don’t believe you should ever plan for retirement on your own. For one thing, emotions always get in the way when we examine our own expenditures, money habits, savings habits, and investment habits. The key term here is habits. It is our habits that often get the best of us and we make poor choices. This is why I always urge my clients to seek out the services of an experienced certified financial planner. A financial planner can help you answer targeted questions that include:
- When should I retire?
- How much will I need for my retirement years?
- How much can I safely withdraw each year without depleting my investment portfolio?
- How do I provide a legacy for my loved ones?
- Will I be able to rely on Social Security benefits?
- If my pension will take care of me, so why do I need to prepare?
- Should I plan for retirement on my own or get targeted retirement advice from a qualified and experienced financial planner?
Prepare for Retirement
- One rule of thumb is that the earlier you prepare for retirement, the more comfortable you will be during retirement.
- Start saving at an early age, keep saving, and stick to your goals.
- Get to know your retirement needs.
- Some experts maintain that you will need 70 to 90 percent of your preretirement income to maintain your standard of living when you stop working,
- Contribute to your employer’s retirement savings plan such as a 401(k) plan.
- Learn about your employer’s pension plan. Make sure you are covered by the plan and understand how it works.
- Learn about how your pension is being invested.
- Most importantly is that you understand the ramifications of early withdrawal from your retirement savings.