If you’re thinking about retirement and are serious about your finances then you need a written retirement plan. Studies show written plans significantly decrease financial stress and increase retirement success. A survey by T Rowe Price states that of the respondents who were 1-5 years from retirement, 45% of them had a written retirement plan in place and 30% intended to get a retirement plan completed. Notably, those with a plan in place tended to be wealthier than those without a formal plan and were also more likely to be working with an advisor.
Every written retirement plan at Inside Edge Capital requires an answer to the following four questions. Then, you can fill in the gaps with strategic planning to increase your bottom line. Today, we’ll cover the core questions:
- Does the value of your savings and investments fit your retirement timeline?
Whatever your financial situation, it’s important to define your goals so that you can make the proper preparation. Some have a specific retirement date in mind, and some want us to find the earliest date possible. Some clients want to see how different rates of spending and gifting affect their future portfolio. Going back to the survey, 65% of pre-retirees don’t know how much they will be able to withdraw from their savings during retirement. This isn’t great, as overspending could deplete retirement assets early while underspending could impede financial satisfaction.
Through our process, we put together a personal balance sheet and cash flow table, as if your household is its own successful corporation. With careful, competent consideration we can provide the context needed to answer the retirement question and help our clients be more prepared to make those moves.
- Is your nest egg prepared for different economic outcomes, such as high inflation, economic recessions, and market volatility?
Once we have the right information in place, we can run the numbers to evaluate how resilient your investments are against various economic conditions. Some may need to get more aggressive to protect against inflation, while others might need to start de-risking their portfolio to maintain liquidity for retirement withdrawals. Going at our client’s pace and education level, we first help you understand these factors in relation to where your portfolio currently stands. Only then do we recommend adjustments to your current asset allocation.
For those who want us to execute a specific allocation as part of their overall portfolio, we will do so after gaining the proper understanding and due diligence of how our managed investments interact with the rest of your portfolio and savings.
- Are you properly planning for Social Security and Medicare?
Planning for Social Security and Medicare involves understanding the optimal timing for benefits and coverage. Some individuals may benefit from delaying or starting early with Social Security to optimize their monthly payments. The Medicare system is another benefit that should be navigated strategically to avoid premium increases and ensure adequate healthcare coverage. By thoroughly assessing your options with you, we can help you make informed decisions that maximize the options available to you.
- Are you being tax-efficient with your investments?
Not being tax-efficient with your investments can bite into your returns over time, and the years before and after retirement are arguably the most effective times to utilize tax planning strategies. At Inside Edge Capital, we consider tax strategies like utilizing tax-advantaged accounts, timing asset sales with consideration to the tax implications, and managing your withdrawals in retirement to minimize taxable income. By communicating and implementing tax-efficient strategies, you can keep more of your money working for you.
At Inside Edge Capital, our process reflects our passion for improving retirement outcomes for pre-retirees and retirees. We do additional strategic planning for our clients in all areas of personal finance, but those are articles for another time. This core plan serves as a vital guide and ensures you are making the decisions necessary to be prepared and confident for the future.