Retirement is one of those inevitable things that comes up when people start talking about their finances. And like it or not, it’s something that you will have to prepare for if you want to ensure that your best years are ahead of you. Everybody knows that they should start planning for their retirement, and most people have good intentions behind doing so, but they don’t quite have the ‘how’ in place.
In other words, many Baby Boomers are missing the details that add up towards the creation and implantation of a solid financial plan. Most try to wing it with a fantasized picture of what retirement planning should be like, never taking the time to consult with financial experts or those ahead of them in years that have successfully figured it out. This is really one of those times where doing your due diligence and reading and researching will go a long way in keeping your finances in check.
With that said, here’s a short list of some of the key items that should be in your retirement plan but might be missing. Don’t beat yourself up if you do not have all of them readily available yet. Simply take note of what you have and don’t have, and make the necessary adjustments to get yourself on track.
Item No. 1: Professional Guidance
The fact of the matter is that you are not going to be able to do it alone. Unless you are a financial guru with decades of experience, you are going to need some help and guidance with setting up and following a comprehensive retirement plan, (remember, you only get one shot at this).
There is nothing wrong with doing your own reading and research. Self-education is one of the greatest gifts that you can give yourself in any area of life. However, you are better off having a professional opinion on how you should be handling your retirement planning. This is a new stage of your life that you are entering, and it is best to enter it with somebody who has the knowledge, tools, and resources that you will need to succeed. These professionals will be able to assess your individual situation, help you determine how much needs to be saved, and anything else that it will take to ensure a seamless and stress-free retirement.
Friends and family can be helpful in providing useful advice, but you should first and foremost seek guidance from a professional that has the experience and insight to help you plan your future.
Item No. 2: A Plan for Withdrawing Your Savings
One of the biggest downfalls about retirement is the fact that you are not actively making money like you used to when you worked full-time at your career. This means that you will be running through a set amount of money per year during your retirement.
I find that many new retirees are shocked to find that they have spent much of their savings much faster than they had anticipated. They were not able to properly account for all withdrawals, cost of healthcare expenses, and adjusted for inflation properly. This is usually the result of making a frugal estimate in the beginning yet practicing financial behaviors that are not in line with this initial mindset.
Nobody is asking you to have millions of dollars in the bank, but you do need to have a sizable portion of money saved up if you intend to live a comfortable lifestyle when you decide to fully retire.
Item No. 3: Knowing What Social Security Can or Can’t Do for You
Baby Boomers tend to be heavily reliant on Social Security, or at least plan to be when retirement comes around. The problem with this is that you may not receive the benefits that you think you will. Many people tend to overestimate this number and then become rather taken aback to find that what they actually receive is a lot less!
That’s not to say that Social Security doesn’t provide you with enough retirement income to pay living necessities, nor is it something that should be ignored. At the end of the day, it is merely one piece of the entire retirement planning puzzle. It is important to note that your monthly benefits will fluctuate, so always make sure that your estimate is conservative. If you are in doubt of the amount you will receive on a monthly basis, visit a professional financial advisor and get their professional guidance.
Item No. 4: All of Your Income Sources Added Up
In order to ensure that you know exactly how much you have going into your retirement, you will want to take stock of every single income source that you have available and find their total sum. It is important that you remain fiscal with this number, as you do not want to overshoot it and later figure out that you were operating under the premise of a false financial promise.
Items include (but are not limited to) your annual contributions to your retirement account, Social Security benefits, pension plans from your employer, bonuses, current savings and investments, and any inheritances you may receive from family.
Based on this total dollar amount, you will be able to see if you have to invest more money over your remaining non-retirement years. Keep in mind that the total sum mentioned above does not include subtractions due to any funds that you may wish to leave behind for your children.
Conclusion: As long as you have all of the four items mentioned above in your retirement plan, there is no reason why you shouldn’t be ready to head into your retirement phase knowing that your financials have been taken care of. The hardest part of any plan isn’t the creation of it, but rather sticking to it each and every day. It is that steadfast consistency that separates financially successful Baby Boomers from those who are not.