February 9, 2015

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Let’s Put Our Money Where Our Mouths Are


Golden Years

Plan for Retirement with These Six Steps

By Sean P. Lee, MSFS, is president and founder of SPL Financial, Inc.

February 9, 2015

Regardless of where you might be in your career, proactively planning your retirement can have a significant impact on your golden years. Here are six steps to help you get on track and stay on track with planning your retirement.

Lifestyle Planning: Define your ideal retirement

Retirement may seem like a distant thought or it could be right around the corner. Regardless of where you are, in order to begin planning, you must determine what your ideal retirement looks like. Once you step out of the workforce, do you envision yourself traveling, taking on a new hobby or just relaxing? This step is about bringing clarity to your life’s goals from both a financial and personal standpoint.

 Income Planning: Determine how much money you’ll need

Once you have successfully identified your desired retirement lifestyle, you can begin calculating your income needs and building an income plan. This step includes one of the most difficult questions in retirement planning: How much will you need to have saved in order to live your desired retirement lifestyle?

To get a rough idea, the first step is to focus on the essentials or your “must-haves.” Start by estimating and building out your expenses based on your current 12-month spending habits. Make a concerted effort to eliminate unnecessary costs and identify which expenses are likely to change. For example, will your mortgage be paid off by retirement? Will you eventually be adding your child’s college tuition to your list of expenses? By laying out your future expenses, you can begin to calculate the amount of money you will need for your golden years.

Next, identify the costs of your desired lifestyle, or your “wants” in retirement and add that to your budget. When combined, this will give you an estimate of what you need to do to live how you want in your retirement years. Remember, retirement could be as long as 30 years—plan accordingly.

Investment Planning: Invest for your future income

As you continue to save and invest for your retirement, it is also important to consistently analyze your investments. The investment decisions you make today could impact how you live in your later years.

While it’s prudent to be well diversified, it’s important that the investments you use to accumulate wealth are risk appropriate. Review your current investment situation and identify how much risk you’re currently taking. How exposed are you to the market?

The closer you get to retirement, the less you should be exposed to market volatility, as the time to recoup from potential losses is limited. Once you have an idea of your current situation, compare and contrast it with your retirement goals. Your investment plan should strike a balance with enough growth to reach your goals and fight inflation, without being exposed to an uncomfortable level of loss or volatility.

Tax Planning: Minimize taxes on your retirement income

With future tax rates unknown, proactively planning now could save you from a hefty tax bill come retirement time. You cannot control what the government may do with taxes in the future, but you can control how you contribute to your retirement accounts now. The good news is there are a number of vehicles, such as Roth IRAs, and strategies that can limit your future tax burden as they allow you to pay taxes today and forgo taxes on the withdrawals in retirement. There are many considerations to review with these techniques, so be sure to discuss your options with a financial professional to find the best fit for you.

Healthcare Planning: Insulate your wealth from the unexpected

One of the biggest concerns pre-retirees face is outliving their retirement funds, and a factor that can contribute to this is the high cost of long-term care expenses, which are not covered by traditional health insurance. Once you reach age 50, you may want to begin considering a long-term care insurance plan or hybrid insurance products that provide healthcare benefits for critical or long-term care, such as assisted living.

Leaving a Legacy: Protect your estate and provide for your heirs

It’s up to you to make sure your wealth is taken care of properly after you’re gone. Creating both a will and an estate plan and keeping them updated throughout your lifetime is a critical and often neglected aspect to retirement planning. Stay up to date on the proper legal paperwork, and remember to consistently double check your designated beneficiaries. After all of your hard work in planning for your retirement, it is important to make sure your life savings is going to whom you want as efficiently and effectively possible.

Investment advisory services are offered through Global Financial Private Capital, LLC, an SEC-registered investment adviser. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Insurance and annuity product guarantees are subject to the claims-paying ability of the issuing company, and are not offered by Global Financial Private Capital.

Sean P. Lee, MSFS, is president and founder of SPL Financial, Inc.  

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