The topsy-turvy markets recently have caused goal-focused investors to take a hard look at their existing financial plans.
Are you still on track to create a sustainable financial future? Are any changes needed? Planning for your eventual retirement is totally different than anything else due to the number of unknowns; how much you need and for how long top the list. Because you only retire once, you have to get it right.
Our new website has a couple specific tools to help investors reach a state of retirement readiness. The Retirement Tracker provides a quick overview of where you should be financially at different ages. You can plug in your current savings percentage for a quirky reply and perhaps some encouragement.
Additionally, we have created our Retirement Readiness Checklist that delves into the core drivers of retirement readiness. These include:
Career Capital – For goal-focused investors in their peak earning years, the most valuable asset likely doesn’t appear on any personal financial statement. The ability to earn income and save/invest some portion of that income is known as human capital or career capital. Career capital usually peaks 5-10 years before retirement and this timeframe is therefore the most important time for making substantial progress toward your retirement objectives.
Debt- The watchword for retirement today is flexibility and debt limits this flexibility. While there are good reasons for having some debt during your working life, debt should likely have a much more limited role during retirement.
Liquidity- As you approach retirement it’s crucial to understand exactly what segments of your portfolio will provide the monthly withdrawals needed for living expenses. Illiquid investments such as real estate might have some merits, but may not reliably provide the liquidity needed for regular retirement withdrawals.
Income AND Growth- Because of inflation, retirement living expenses increase every year. In order to maintain the same living standard, your overall portfolio income must contain a significant element of growth. This translates into the need to maintain permanent exposure to “risky assets” like stocks in order to offset inflation.
Emotions- The recent market uneasiness has provided an instant lesson in the importance of emotions. None of us can control day-to-day market movements, but we can control how we react. Your investing time horizon and specific long-term goals should drown out the inevitable market volatility.
We Can Help
The sheer amount of information and mis-information today makes preparing for retirement much harder than in previous generations. Retirement readiness usually requires course corrections along the way. We help by being both an advocate and ally. Start there. Ready for a real conversation?
Related: Why the Financial Media Concentrates on Fear-Based Stories