Recently I was doing some research on the retirement income challenge and while many of us diligently save each month in an employer-sponsored retirement plan such as a 401(k) or 403(b) or an IRA option such as a Traditional or Roth, do we really understand what we are saving for?
While each individual will have their own unique answer to this question and personal goals, we are all likely trying to achieve four common goals within our retirement plan which are;
Let me break down specifically what I am referring to with each of these goals
The primary goal for most people is to maximize their spending power in such a way that they can continue to spend at a level that affords them the lifestyle that they were accustomed to during their working years. This means that spending during retirement remains consistent and sustainable without any drastic reductions no matter how long retirement may last.
Longevity is likely the most fundamental risk when it comes to retirement planning simply because no one knows exactly how long we may live. But at the end of the day, we want to ensure to the best of our abilities that we have enough money to make it to the end. Here are some fascinating stats regarding life expectancies;
- A healthy male who reaches age 65 has a 50% chance of living beyond 85 and a 25% chance of living beyond 92
- A healthy female who reaches age 65 has a 50% chance of living beyond 88 and a 25% chance of living beyond 94
- A healthy couple who reaches age 65 has a 50% chance of living beyond 92 and a 25% chance of living beyond 97
A long life can be wonderful, but it can also be costly. Looking at only your investable asset to self-manage your longevity can be very risky. However, there are various strategies that can be used to help transfer some of this risk utilizing insurance and annuities. (Further details on this topic will be provided in an additional article)
The U.S. is about to undertake the greatest transfer of wealth from one generation to the next as the Baby Boomers begin to retire and make plans to leave behind their estates. For some, this is of crucial importance to them personally as grandparents want to help fund education plans and even help their own children with homeownership not to mention a variety of other philanthropic causes.
Just as we try to build emergency cash reserves as part of a balanced wealth management plan today, maintaining a sufficient reserve amount for unexpected contingencies during your retirement years is of great importance. When you couple not knowing how long you may live with not knowing how your investments may perform, even the smallest of unexpected financial expenses could wreak havoc on your overall retirement plan
So if anyone is struggling to take that first step in the retirement planning process understanding what these four goals mean to you should help get you started. Remember that the first step within any aspect of building a wealth management plan is likely the hardest. However, developing a vision for what success looks like and knowing what you would like to accomplish, can and likely will make this journey extraordinarily rewarding.
For more information about how we can build help you build your own customized wealth management plan you can reach us at 248-860-2279 or firstname.lastname@example.org.