I know I have an idea of how I want to retire. Which is what I want to do when I get to that stage, but; Where do I start? How do I plan my retirement correctly?
Before continuing, I always want to express that the information provided is for the purpose of providing you with a consult, which will help you realize what are the options you can count on, based on your budget, needs, and reality when analyzing the acquire of financial protection. I am not a financial analyst nor will I ever make any decision, or tell the client which product he/she needs. It is a sole decision of the client and you are always urged to consult with your accountant or CPA with any questions related to your financial status before making a decision. If you would like more information after reading this article, and would like the advice of a certified financial analyst, we would be happy to schedule such a consult for you.
Let's see what are the basic points of retirement planning that help us understand where we should start working towards that stage of our lives. First of all; What is financial wellness for you? It is a very important question since a good understanding of it prepares you to work a retirement that fits your reality, needs and budget. Financial well-being is having control of finances day by day and month by month.
One way to control those finances is to be prepared with a running budget, a budget in case your spouse or policyholder dies or becomes disabled, and a retirement budget. That being said, now that we have a pen and paper and are ready to go, ask yourself;
How do you visualize your retirement?
When do you want to retire, and for how many years will you need it?
Where will the resources for this retirement come from?
These questions will help you begin to concretize that idea of how you want your retirement to be. Project such idea in your mind. The way you see yourself when you retire. Then, prepare and build your retirement strategy by identifying which are the sources that will provide the income. Once identified, start building the fund where the money will come from. Very important, always consider the risks that will be in retirement.
How do you see yourself in retirement?
Each one of us has different goals, so this is an opportunity to think about what retirement is, not the one you want, but the one you need. Thinking that way helps you keep your feet on the ground and plan for a strategy that is sustainable for you. Obviously, if you achieve the goal of moving on to your next personal level in your life, which it will be great, all the same always plan with logic and reasoning. You can ask yourself where you plan to live when you retire, either in your own home or down sizing, work with something more comfortable and easy to manage. How will you spend your time when you retire? Something that will help you to a more complete visualization is that you see your retirement as something as important to celebrate as the birth of a child. It is a new stage in your life, and just like a child when he/she comes into your life, you have to prepare yourself correctly.
When do you want to retire and for how long will your retirement last?
This question is very important when starting your retirement strategy. Determine how early you need to start working with that contribution or if you are close to retirement age, remember that you will have to work with a considerable amount, according to your needs. A good place to start, is to ask about the longevity of your family to get an idea of what your life expectancy would be. It is usually planned for the next 20 years, but having that information from your family will give you a more concrete idea.
Where will the resources for my retirement come from?
You already have an idea of how you want to retire, you imagined it and you a vision of it. Very good, because it helps you to have an idea where you need to start. You also looked for information related to the longevity of your family. This helps you get an idea of for how long you need to plan your retirement. You already know what you will do during that time and you are preparing to reach that stage in your life which you can compare to the celebration of the arrival of a child, a new stage in your life for which you have to be prepared. Now; Where will the resources for retirement come from? When analyzing that question, it is important to remember what assets you will need in your retirement portfolio.
Assets that grow. You need assets that continue growing in value through retirement. It is important to have an investment portfolio with growth within your retirement. Within this type of income such as bonds, investments, cash or others are used for travel, hobbies, and additional expenses (discretionary expenses)
Immediate access assets. You need assets that you can access. These liquid assets can be considered as emergency funds. A rule that many follow is to set aside 3 to 6 months of income, if there is a medical condition up to 1 year of income saved as an emergency fund.
Assets as predictable income. These are the assets that you will need for your daily life. Annuities, Social Security, and Pension plans are products that can give you access to this predictable income. The same will cover the costs of the house, food, health and necessary monthly expenses to live. What are the expenses that are usually considered during retirement, expenses that will be part of your daily life?
Housing 47%
Food 15%
Transportation 14%
Medical care 12%
Other expenses 12%
Now that you have a better idea of what you need within your retirement planning, the following products can be key pieces of it. In my section "Retirement Supplement" you will find a better description of the elements with which you can work. Among them are:
Social Security
Annuities
Life insurance with accumulation of values
Pension plans
Real estate income
Investments (direct to the market, they are made through licensed brokers)
Income from work or a hobby.
All of this that we have reviewed today is considered as a retirement strategy, not a retirement plan. They are two different things. It will help you to correctly develop the retirement plan you need. But much more information is missing, which I want to provide you with in the next article. Likewise, if you wish, fill out the pre-consult form and schedule a completely free consultation to start developing your financial strategy. All this part of your SAFE PLANNING.