To help you prepare for retirement, it’s important that you take the time to ask yourself a few key questions so you can pinpoint your goals, make a plan, and remove any unnecessary stress around following through on that plan. Still, planning for retirement is no easy task. That’s why it’s essential that you don’t approach the subject lightly.
Whether you’ve just begun considering your retirement plan, or you’re ready to put a plan into action, it’s important that you consider and evaluate many variables. Keep these four questions in mind, and get on the road to a sound retirement plan.
Question #1: What’s your timeline?
People retire at different ages, based on a number of factors including, above all, their financial state, health, and other unique issues. While your timeline will be different from others’, it’s important to start planning as early as possible. Like everything else in life, the sooner you start, the sooner you can reach your goal.
When you begin planning earlier, your portfolio is better prepared to withstand any risks. For younger readers (those of you in your late 20s or early 30s), the majority of assets may be in riskier investments like stocks.
While volatility is to be expected, stocks have a historical advantage over other securities like bonds. It’s essential that your returns exceed inflation. Ask yourself if you’re able to invest more in riskier investments. If so, strongly consider it. And be honest with yourself: what is my timeline? The sooner you know, the sooner you can grow your retirement fund.
Question #2: What are your spending needs?
Many future retirees have the idea in mind that their retirement will involve many days spent on beaches and relaxing—and that’s a great goal! But the reality is, your expenses do not stop the moment you retire. It’s an absolute must that you consider realistic retirement spending needs.
If you anticipate any of the following, you must factor them into your retirement spending needs:
- Medical expenses
- Unique family expenses/circumstances
It’s essential that you have realistic expectations of your expenses—including emergencies—and how long you anticipate your funds lasting. Without proper planning, one or two years of travel splurges can quickly eat into precious retirement funds.
Question #3: How does risk factor into your investment goals?
Your portfolio’s health is foundational to your retirement plans. Finding the right balance between risk and return is absolutely key. You must be honest with yourself about how much risk you’re willing to face, and if safer alternatives make more sense for your goals.
While individuals can come to this conclusion by themselves, I recommended speaking with an experienced retirement planning professional to ensure you’re on the right track. With their advice, you can reduce risk, and find the path forward that meets your needs.
Question #4: Have you evaluated your estate plans?
Often overlooked by some younger couples and individuals, estate planning remains a key component of a sound retirement plan. To help you prepare for retirement most effectively, it’s important that estate planning is a part of that plan.
Make sure you consider:
- Life insurance to cover asset distribution and finances
- Accountants and lawyers familiar with your needs
- Tax planning and how it will impact you and your loved ones
Start planning for retirement today
Planning for retirement that’s several decades away can seem like a strange thing to do. But the sooner you begin, the sooner you’ll see your plan take shape and give you the motivation to stick to that plan.
Whether you’ve just begun exploring your plan or you need sound, experienced advice, reach out to OWLFI today to get the help you need to pursue retirement with confidence.