Retirement Planning Mistakes – Part 2

This is the second in a four-part series of articles on Common Retirement Planning Mistakes. 

In our previous post in this four-part series on retirement planning, we talked about the common misconception only wealthy individuals need to engage the services of a retirement planning professional and how not doing so could be a very costly mistake. As I will mention in every post in this series, every year thousands of people still retire or attempt to retire without seeking professional advice. In most cases, this happens without retirees having developed any type of strategy in their retirement planning! Even in some of the best cases, retiring individuals may need to make some adjustments in their plan.

Whether you’re putting a strategy in place for the first time or you’re reviewing an existing strategy, every retirement plan should include details regarding how to manage each of the five primary planning areas of taxes, healthcare (including insurance), estate planning (legacy), investments and income. Coordinating these areas together and monitoring progress regularly can help ensure you’re on the right track to meet your goals.

In this article, we move on to the second common retirement misconception. It is one that regularly keeps people from meeting with a professional. The misconception is – I’m saving on a consistent basis and that will be enough.

Now, let me give credit where credit is due. If you are saving regularly and especially if you started young, fantastic! You are doing the right thing. KEEP IT UP! However, we all tend to be overly optimistic in our assessment of our true state of affairs and we can end up thinking we’re more prepared for retirement than we truly are. Preparing for retirement today presents a number of challenges and complexities. The fact that you are saving regularly, although important, is just one of many important components to consider.

You should start with the end in mind…in other words, what target are you aiming for? What are your retirement goals? After all, retirement is not about arriving at a certain age as much as it is about being able to achieve a certain cash flow.

Some key retirement questions to answer are:

  • How do you know if you’re saving enough?
  • How long will it take to save what you need?
  • Do you know what your personal rate of return needs to be?
  • Are you funding the right types of accounts from a tax perspective?
  • What if you meet the goal, how will you receive income?
  • Will it last the duration of your retirement? What about the other planning areas mentioned above?
  • How will they affect your goals positively or negatively?

I know that’s a lot of questions (and there are many more that could be asked), but professional retirement planning is meant to help prepare you for two phases in life, the accumulation phase and the distribution phase.

In the accumulation phase, your goal is saving and growing assets and structuring your financial life around those activities. In the distribution phase, the focus shifts from asset accumulation to asset preservation, distribution and legacy planning. Each phase presents its own unique challenges to any aspiring retiree. And, while for most people these phases tend to be age-dependent, this is not always the case. The time-frame for these phases is different for everyone based on their unique goals.

Are you saving? Have you thought about your retirement goals? Perhaps you’ve already saved and you’re retired or getting ready to retire. No matter the phase you’re in, do you have a plan that gives you better confidence that your retirement will be what you’ve always thought it could be? I know nothing is guaranteed; however, what if you could start planning or make adjustments to an existing plan that could benefit you immeasurably down the road? Wouldn’t that be worth your time to discover? This is what retirement planning professionals like us seek to help you with.

We’ve helped countless families retire over the past 25 years and we’ve found the happiest retirees have typically done the following things:

  1. They have a written and defined plan that coordinates the various areas of their retirement.
  2. They have minimal to no debt to service, minimize their expenses or have saved in conjunction to their desired lifestyle needs.
  3. They have a balanced tax structure in their savings. (IE not all their money is in tax-deferred accounts)
  4. They have coordinated their investments with the overall plan needs.
  5. They have a plan for where their income will originate and for how long.
  6. They have mitigated their risks to the extent possible in their unique situation.
  7. They have simplified and refined how they will pass their estate to the next generation.

Success is found in your daily routine. Has your retirement routine today taken you one step closer to your goals? If not, the first step in that routine should be meeting with a professional to help you define your plan, stay accountable and then refine that plan over time as needed.

If you don’t currently have a retirement professional helping you, we’d be delighted to help. Call us to schedule an in-person appointment or call us to attend one of our live events.

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