Chartered Financial Planners

5 Key Retirement Planning Steps Everyone Should Take

Posted By on January 20th, 2021 in Blog, Financial Advisor

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If you want to have a comfortable, secure and fun retirement that you can really enjoy, then you need to build up a financial nest egg to fund it all. It may seem a bit of a drag now but putting together a retirement plan with a financial advisor is the best way to make sure you stay on track and achieve your goals. Planning your retirement starts with thinking about your goals and when you would like to meet them by. You can look into types of retirement accounts and how these accounts can help you increase your funds, as your funds increase a financial advisor can help you invest the money to enable it to grow even more.

Retirement Planning

1) Understand Your Time Frame
Your current age and expected retirement age create the initial groundwork of a retirement plan. The longer you have between making your plan and your aimed retirement age the higher the level of risk you plan can withstand. If you are young and have 30 plus years before your retirement then you should have your funds in riskier investments such as stocks, as you may see larger growth. You should consult a financial advisor when it comes to investing your retirement funds.

2) Determine Retirement Spending Needs
Having a realistic idea of your post retirement spending habits will help you get an accurate idea of the size of the retirement portfolio you need. Most people believe that once they retire their annual spending will be between 70-80% of what it currently is, but any financial advisor will tell you this often isn’t the case. It is more realistic to assume that your spending will be the same, if not more, as the cost of living increases every year and once you retire you will have more time on your hands and so more time to spend.

3) Calculate After-Tax Rate of Investment Returns
Once you have worked out a timeline and what your spending requirements will be, you must work out the after-tax real rate of return, you will want a financial advisor to help you with this. Calculating the after-tax real rate of return will let you know whether your retirement portfolio will produce the needed income.

4) Assess Risk Tolerance vs. Investment Goals
Whether it is yourself, or a financial advisor, who is in charge of the investment decisions, a proper portfolio allocation that balances the concerns of risk aversion and return objectives is arguably the most important stage when it comes to retirement planning. How much risk are you willing to take to meet your objectives? You should make sure you are 100% comfortable with the risks being taken.

5) Stay on Top of Estate Planning
Estate planning is another step involved in a successful retirement plan. Each aspect requires the expertise of different professionals such as lawyers and accountants. You should also ensure you have life insurance as this is an important part of estate planning and the retirement planning process. Having a proper estate plan and life insurance coverage means that your assets can be distributed the way you would want, in the event of your death.

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