Retirement planning isn’t for sissies

Written by V. Raymond Ferrara, CFP®

On May 21, 2021

The process of actually planning to retire is not easy, but going into retirement with no formal written plan or quasi-plan makes the golden years a lot more complicated and unpredictable.  It can all be a bit overwhelming, both financially and emotionally. 

For 40-50 years, you have worked, earning a paycheck, a bonus (hopefully) each year, saved, invested, etc., and then the paycheck and the bonus stop one day.  It is a pretty uncomfortable feeling.  Maybe you are lucky enough to have a traditional pension, but then you have to decide the best way to take the pension.  You probably have a Social Security benefit, but do you take it at age 62 (the earliest), Full Retirement Age (FRA) which is between 66 and 67, or do you wait until age 70 (maximum)?  What about health care – use COBRA or ObamaCare if under age 65, or switch to Medicare at age 65?

How much income do you need to cover expenses?  Most people severely underestimate how much they spend.  Break it down into fixed (must have) expenses and variable (like to have) expenses.  Once you subtract out your fixed (pension, Social Security, annuities -if any) income, how much more income do you need?  How much do you have in savings and investments?  What return are you projecting?  If the amount you need to withdraw is greater than 4-5% of your investments, you will likely have a problem down the road.

How could you have a problem if the amount you are projecting to earn is greater than the amount you will withdraw?  First, what if the market is down in bear territory and your portfolio declines 20% or more in a given year, or perhaps over several years?  How will you recover the lost value?  Secondly, you will need to make adjustments for inflation over the 20-30 years in retirement.  Either one, let alone both, will have a dramatic effect over that time period.

So, let’s begin with the end in mind – a happy, stressless retirement financially and emotionally.  The best way to do that is with a written plan.  Take advantage of our one-hour complimentary consultation to learn more about creating a retirement plan.  You are retiring for the first time; we have helped thousands achieve the retirement they always wanted.

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