Provided by Daniel Kelley & Kevin Guarino – Our Friends at Clover Leaf Financial, LLC
As you approach 60 you’ll start thinking more and more about your financial stability. When can I retire? Do I have enough? Am I prepared mentally as well as financially? While these are only some of the MANY questions running through your mind it’s right that you’re asking them. With retirement no doubt on the horizon, ensuring you’re prepared is crucial. Here are the five goals that I work through with my clients to help them stay on track for a comfortable financial future.
1. Know Your Retirement Number
Before you take that first step toward retiring, you need to know what “enough” looks like. Start by estimating how much you’ll spend during retirement. Consider the essentials like housing, healthcare, food, and monthly bills. From here we’ll start thinking of the “fun” aspects of retirement such as travel, recreation, and possible relocation.
Next, identify your sources of income. How much will you receive from pensions, annuities, and social security? While a full retirement income plan may involve timing these differently, we’re working on our starting point. Subtract this from your monthly expense needs to determine how much you’ll need to withdrawal each month from your retirement assets.
Finally, decide on your withdrawal rate. A common goal is 5% annually, but this can vary based on your investments and risk tolerance. If you’re aiming for a 5% withdrawal rate and need $50,000/year, you’ll need $1,000,000 in retirement assets.
2. Develop Your Investment Transition Strategy
As you approach retirement your investment strategy should evolve. You may be fully invested in stocks at 60 but want to get more conservative and focused on income as you approach 65. In this case it’s important to plan ahead a gradual transition. Rather than making a big shift all at once – which invites the risk of poor market timing – consider using dividends and new contributions to slowly build up your fixed income allocation. The goal is to move from where you are now (Point A) to where you want to be when you retire (Point B) with minimal disruption.
Understand why you want to make this transition. Your bond allocation can be a safe haven to pull income from in a market downturn. It helps avoid the risk of withdrawing from your stocks during times of market volatility which will happen even in the most carefully laid plan. Consider discussing with a professional what your ideal allocation would be and really understanding why. With this, even in the most stressful of investment environments, you can remain confident in your plan.
3. Implement a Tax Plan
Taxes don’t stop at retirement, and neither should your tax planning. I’ve gone deeper into calculating and actually paying your taxes in retirement here. A well build tax strategy spans 20 to 30 years and adapts to opportunities as they arrive. From Roth conversions and tax loss harvesting to taking advantage of healthcare subsidies, it’s important to know what your options are and be able to identify the opportunities to make quick decisions.
Regularly review your tax options to decide what actions to take when. Tax planning is less of a set plan and more of having the knowledge to know when to act.
4. Secure Your Assets
It’s not just about growing your wealth – protection is equally important. You’ve worked your whole life to prepare for this and the last thing that I want to see is for you to lose a significant portion to an unplanned and unprepared for event. Make sure you have the right health insurance and estate planning in place. Health insurance should be tailored to your specific needs, if you have a condition but the specialist is outside of your coverage, then your coverage isn’t doing its job.
It’s crucial to ensure your estate documents, like your trusts, will, and directives are up to date. The goal here is simple: safeguard the assets you’ve worked so hard to build up.
5. Create Your Life Plan
A financially secure retirement won’t mean much if you don’t know how you’ll spend it. Looking past the numbers, what brings you joy and fulfillment? Do you want to relocate? Take that dream vacation? Pick up an old hobby? You may be very well prepared from a financial standpoint but very unprepared from a lifestyle or personal point of view. What is meaningful to you? Chase that.
While approaching 60 is a significant marker in your journey, it brings the need to buckle down and get serious about your financial future. By having these 5 goals, you’ll be off to a great start to secure the financial future you desire and deserve. It’s never too late to start, if you have any questions about your specific situation, our team at Clover Leaf is happy to guide you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.