Important Steps in the Retirement Planning Process


Planning for retirement is an important part of securing your financial future. But many people either do not have any sort of plan at all, or are simply not doing enough to ensure their financial security in their retirement. Retirement planning is similar to regular financial planning in many ways, although it requires longer-term thinking and thus more estimates and guesswork. Like any other financial plan, retirement plans should be able to evolve over time, changing and shifting with your financial situation.

If you are ready to start planning for your retirement, here are a few steps you need to take to establish the best plan for you.

Account for Longevity

One of the steps that is often overlooked when creating a retirement plan is the issue of longevity. In order to plan properly, you must at least consider how long you and any dependents (for example, a spouse or an adult child) might live. It may sound a bit morbid, but the truth is that it is essential to helping you ensure you have enough to last. Try the Social Security Administration’s life expectancy calculator to obtain a reasonable estimate.

With advancements in medical treatment, people are living today longer than ever. Many end up draining their retirement savings early because they underestimated their lifespan—perhaps a welcome mistake! However, many people also fail to account for the cost of long-term care because they don’t think they’ll need it, or they mistakenly assume it is covered by Medicare. (It’s not.)

According to the US Department of Health and Human Services, about half of Americans turning 65 will need long-term services and supports (LTSS)—this includes people who will need long-term care in a facility as well as those who need in-home assistance with daily tasks like getting dressed, bathing, and eating. The department’s research also indicated that people turning 65 in 2016 would rack up about $138,000 in LTSS costs. Since women tend to live longer than men, they are more likely to require LTSS, as are people who live alone.

Consider Your Lifestyle

Once entering retirement, most people simply assume they will downsize their lifestyle. Generally speaking, the traditional advice was to assume that your monthly expenses during retirement will be around 70-80% of what you spent previously. But that assumption is not always realized, and in fact, it is often untrue, especially considering medical expenses and other costs like a mortgage that is not paid off. Look carefully at your own lifestyle now and consider what it costs you on a monthly basis to maintain it. If you truly think you’ll downsize, estimate those new monthly expenses as well.

However, be honest with yourself about whether you’ll actually be able to cut back, or whether you even want to. Perhaps you want to maintain your current lifestyle, or perhaps you want to travel extensively or purchase a vacation home. That’s something you’ll need to plan for if you want your retirement plan to work for you.

Think about Generating Income

Though savings are certainly an important part of any retirement plan, one often-overlooked aspect is earnings. Think about how you’ll generate income in retirement. Investments can help you establish a revenue stream that will make your savings last longer. You might also consider taking on a part-time position to earn wages during the early years of your retirement. Many people find an abrupt retirement, from working full-time to not working at all, boring. They miss having a job in some capacity. Working a part-time job can ease you into retirement and provide some intellectual and social stimulation, in addition to generating extra income to help your savings last.

Keep in Mind Your Risk Tolerance

Risk tolerance is an important part of assessing your retirement investment portfolio. In general, experts advise that the younger you are and the further from retirement, the more risk you can afford to take on in your investments. Conversely, as you start to approach retirement age, you may want to reduce your risk exposure by adjusting your portfolio. The idea is that you can afford to take greater risks when you’re younger because you’ll have more time to recover from any mistakes or downturns; when you’re older, you won’t have time to build back after a significant loss.

That said, risk tolerance is an extremely individual aspect of investing, one which you’ll need to determine for yourself, in consultation with a professional financial advisor. Remember that risk tolerance can change from year to year, and it is completely acceptable to adjust your portfolio depending on your financial health. When you’re doing well financially, you can afford to take on more risk in your investments when compared to other years when things are tight.

Start Early

No matter your financial situation, your best bet for ensuring financial stability throughout your retirement is to establish and start contributing to a plan as early as possible. Let time work for you, rather than against you, as many people who start saving too late discover. The earlier you begin to save, the better—thanks to compound interest, your investments will generate exponentially more money the more time you give them to grow. Start saving and investing for your retirement today!

Published by Robert Ryerson

A financial professional with more than three decades of experience, Robert Ryerson works closely with clients in the Freehold, New Jersey, area to meet their financial planning needs. As a Certified Financial Planner (CFP) at New Century Planning, he focuses on retirement income planning, as well as estate administration, regularly assisting his clients with legacy and estate planning. He also advises them on health and disability insurance, including Medicare, Medicaid, and Medicare Supplement Plans. Mr. Ryerson’s many years helping his clients navigate the complexities of retirement planning gave him a deeper understanding of the healthcare costs that retirees face. In 2013, he drew upon this knowledge to co-author the book What You Don’t Know About Retirement Will Hurt You. Outside of his work at New Century Planning, Robert M. Ryerson is a regular fixture at workshops and seminars on retirement. He has delivered several keynote speeches on the often-confusing topic of required minimum distributions. Mr. Ryerson continues to share his financial expertise as a facilitator of online courses for Certified Public Accountants through The Society for Financial Awareness. In the early 2010s, Mr. Ryerson became concerned about the threat of identity theft after noting the many cybersecurity breaches suffered by major companies. He became a Certified Identity Theft Risk Management Specialist (CITRMS) in 2014. He has since taught identity theft recovery courses at local community colleges. Mr. Ryerson also wrote a book on the topic entitled What’s the Deal with Identity Theft: A Plain English Look at Our Fastest Growing Crime. A graduate of Rutgers University with a degree in economics, Mr. Ryerson began his career in the financial services industry as a stockbroker. He obtained his CFP designation in 1991 and began working as an independent financial planner a few years later. In addition, he is a notary public.

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