My Retirement Plan Evolved

My retirement plan evolved over the years. It started as no plan at all, a state that remained unchanged for too long! But eventually it was formalized and over the years I refined and adapted the plan.

I think it would be unwise to be inflexible regarding your retirement planning. Circumstances change, we change, and the investment climate changes. What remains fairly constant is the need for you to control and understand your retirement planning.

Perhaps we should re-visit the components of your retirement planning and maintenance:

Net worth
The priority of your pre-retirement planning should be to save as much as possible for your retirement. How much is enough? Only you can determine that by making use of a good retirement income planner. Elsewhere on this Website we review some of these planners.

Your net worth would include the estimated amount saved in your various retirement provision plans, your investments, as well as your home equity.

At retirement, and beyond, the priority is to protect as much of your capital as possible while making cash available for your retirement consumption.

Longevity
Your longevity is one of the retirement parameters that's infinitely variable. Elsewhere on this Website we discuss longevity in more detail. Most commentators advise that you allow in your retirement planning for a retirement period of thirty years for you and your spouse.

Risk
Your risk tolerance could be higher in your pre-retirement years, but when you reach retirement you should lower the risk profile of your portfolio. Even at the cost of a slowdown in the annual income of your portfolio. The simple reason is that you probably won't have the time or opportunity to recover from financial losses.

Cash
I work on a minimum two year planning cycle for the cash required to cover my expenses in retirement. It allows for time to liquidate assets if required. If I will need to draw cash from my retirement portfolio in two year's time I notify my portfolio manager accordingly. Together we then plan what to liquidate and when.

Track spending
Tracking your spending should become a habit during pre-retirement. It is a good idea to combine it with a budget too. After retirement the tracking of your spending is not an option. I personally neglected this for too long.

For an accurate estimate of the cash you are going to need over the next two years, you need to track your spending. We discuss this in more detail elsewhere on this Website.

It is my opinion that you should re-visit, and possibly adjust, your retirement plan at least every two years. I am ten years into retirement and I do a review of my retirement plan at least once a year.

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