In the Olympics, you may have had a chance to watch a track and field superstar win a gold medal. Once they cross the finish line, their sheer excitement, happiness, and pride for their country is the engine that makes them take that victory lap. The pressure is gone, the results of the hard work show and it is their time to shine and celebrate. That lap that they ran is on their terms. They can stop for pictures, high five the fans, and just take it all in.
Retirement used to be viewed as an artificial finish line. People used to think that when they turned 65, they would collect social security and/or their pension and play golf. They had visions of drinking lemonade on the porch and watching time go by.
Today, with longer life expectancy and our desire to feel more engaged, there is a new paradigm for retirement planning. It is a time for us to take that victory lap. It’s the time for us to do the work that we have always wanted to do. It’s a period for us to touch the lives and causes that we have supported during our working years – but with a greater emphasis.
So when you think about retirement planning, think about your victory lap. What will you be doing day to day? What new experiences do you look forward to? What is it that you really want to achieve? Where will you be living?
The clearer you are about what you want for your future, the easier it will be for you to make decisions about financially planning for your retirement. To get started, consider the following ingredients while you are baking your retirement cake.
- Expenses in Retirement – How much will it cost you to live in today’s dollars, in retirement? Break down your expenses into 3 categories: needs, wants, and wishes.
- Roth IRAs- Great way to reduce the amount of taxes you will pay in retirement.
- Social Security - If you think it will be around when you need it, try to take your benefit at normal retirement age, rather than at the earlier age (for example 62). You can even discuss with your financial planner what would happen if you delayed taking it until age 70, where the benefit would be greater.
- Cash Value Life Insurance - Don’t forget that this could be money you could use to live on, or at least fall back on.
- Sequence Of Returns - If you’re far away from retirement, the sequence of your portfolio returns are not as important. They play a much bigger role if you’re within 5 years of retirement.
- Withdrawal Rate- Plan on withdrawing no more than 4.00% from your portfolio per year in retirement. This is the industry standard which models are based on and which basically says there is a lower probability that you will run out of money.
(This article is for informational purposes only and should not be construed as individualized investment advice.)