Your Retirement Financial Planning - Take Control!
How You can Eliminate Uncertainty
Do you have an uneasy feeling that your retirement financial planning might be inadequate? It probably is inadequate.
By the time I got serious about my financial planning for retirement, my provision was hopelessly inadequate.
Your retirement financial planning in a timely fashion is vital to your future. It is the most important planning exercise you'll ever do!
The days that employees would commit their entire working lives to a single employer in order to gain a pension from that employer are long gone.
But the voluntary nature of defined contribution plans that replaced the old defined benefit plans had the result that, in many cases, you will have less money in your defined contribution account at retirement than you require for retirement.
Here are some issues you face:
- What's the lifestyle you plan to have in retirement?
- What's the projected shortfall, if any, that you anticipate in your financial situation by the time you retire?
- How are you going to plug that shortfall by the time you retire?
- What strategies are you going to apply to fight inflation when you are in retirement?
- How are you going to control your financial future to be able to retire with the resources needed to achieve your desired lifestyle?
I am not a financial advisor. I retired in 2001. I've got nothing to sell to you. What you get on this site is based on my own experience and research, what I observe that is happening to colleagues and friends that retired, and the experience of visitors to this site.
I cannot offer you any solutions. All I can do is to review possible solutions. But you need to take control of your retirement planning and eliminate uncertainty.
You should look forward to retirement as a time to relax, travel and enjoy life. Do expect challenges. The more time you spend thinking through the issues you face, and preparing for them, the better you will be able to respond to life's curve balls. You'll also be better prepared to retire as planned, on your own terms.
If you have an aptitude for in-depth study on this subject, I can recommend a handbook planning retirement.
Other retirement planning resources can be found here.
Ok. Let's get to work and discuss some issues.
What's the lifestyle you plan to have in retirement?
Keep in mind that no one can predict the future exactly. What you know now will give you an estimate of what to expect in the future. That's the basis for your retirement financial planning.
Where will you live? Many of us bought or built our dream house years back in a new development. Reality is that the house and development might be considered up-market by today's valuation. It might be very comfortable, but it is probably too large for retirees. Property taxes remain, and rise, even if your property has been fully paid. The older the property the more likely it is that it would need substantial ongoing maintenance.
It is not easy, in fact it is emotional, to accept that your nice comfortable house is not going to be suitable for your retirement lifestyle.
Do you plan to travel extensively? Fantastic! That's what we did when we retired. But a few words of caution. If you haven't traveled extensively for leisure for at least ten years before retirement, it could be a huge awakening to start when you have retired. In our lifetime air travel changed from very easy and comfortable to very un-easy and un-comfortable because of the numerous security controls and restrictions!
If you traveled extensively for business during your working life, keep in mind that to maintain a lifestyle of business class air-travel, access to special airport lounges, convenient hotel accommodation, and so on, could be a huge drain on a personal retirement budget.
Please keep in mind that financial planning and retirement planning go hand in hand. You might think that the sum of all your financial planning efforts is to grow your own net worth, but in reality it is to support you during your retirement.
What's the projected shortfall, if any, that you anticipate in your financial situation by the time you retire?
A good starting point for retirement financial planning is a discussion of average retirement income. We dedicate a separate page to this discussion.
Next, have a look at our page on retirement statistics. You also need a retirement income planner for your retirement financial planning. There are many available on the Internet. I review one or two.
If you haven't got a retirement income calculator, visit this page for some ideas.
How are you going to plug that shortfall by the time you retire?
To answer this question we need to look at the various Retirement Provision Plans available.
Making adequate provision for your retirement involves several parameters:
- your current lifestyle
- what you want your lifestyle to be during retirement
- how much you can afford to add to your retirement provision accounts
- your risk tolerance
- your health
- your expected time in retirement
It is my opinion that it is not possible to over provide for retirement. The more you save, the better chance you have to support yourself.
What strategies are you going to apply to fight inflation when you are in retirement?
My own father retired at age 60 with a good pension – or so we thought! He remained active for several years and generated substantial extra income through his lifetime hobby. But by the time he passed away at age 85, his 'good pension' was so eroded by inflation that it could not cover all costs anymore.
In a separate section we look at retirement investment planning as a strategy for your retirement financial planning.
How are you going to control your financial future to be able to retire with the resources needed to achieve your desired lifestyle?
The key is to fully understand everything, even if you have a qualified and trusted advisor.
You need to also consider retirement and tax planning. How about retirement insurance? Know and understand as much as you can. That's how you eliminate uncertainty. Retain control of your retirement financial planning.
There are many resources available on the Internet although most of them want to sell a certain 'solution' to you. Try to remain independent.
Visit also our discussion on choosing individual retirement account services.
Here are some more related discussions:
Mortgage retirement is a subject that I tried to avoid on this Web site. Simply because I do not have any firsthand experience on this subject. My opinion would be just that: an opinion.
Get Retirement Planning Advice . . . And Then Implement It?
To get retirement planning advice is the smart thing to do, but to act on the advice is not always that simple!
Social Security Retirement Benefits
Social Security retirement benefits are available to 96 percent of American workers who are covered under Social Security. But the official Website for Social Security warns: 'you should not rely only on Social Security for your retirement income.'
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