We all want to retire comfortably. But what does “comfortable” really mean when it comes to retirement? And how do you create a plan that helps you achieve it? Unfortunately, there’s no magic formula. However, making sure your strategy includes certain key ingredients can greatly increase your odds of success. In my experience, there are 5 Keys to Planning a More Comfortable Retirement.
1. Planning Holistically
For most, a more comfortable retirement means a more secure retirement. If you’re like most, you want a retirement that allows you to live the same lifestyle you’re used to, and to do the things you never had much time for while working, such as traveling to spend time with friends and family and focusing on activities that make you feel happy and fulfilled. Maybe work is one of those things that makes you happy, and that fact illustrates why it’s important to take a holistic approach to retirement planning.
Holistic means planning a retirement that accounts for every aspect of your comfort—not just your financial health, but also your physical, mental, and emotional health. If your job is the most fulfilling part of your life and you leave it without knowing how you’ll fill that emotional void, it won’t matter how much money you have or how it’s invested. Your retirement won’t be more comfortable because you’ll be restless. On the other hand, if you have another passion (vintage cars, deep sea fishing, etc.) but don’t have a financial strategy that helps to provide enough income for you to pursue it, your retirement won’t be more comfortable either because you won’t be able to enjoy the things that make you feel happy and fulfilled.
So, how do you go about planning holistically? That brings us to the second key to planning a more comfortable retirement:
2. Planning with Specific Goals in Mind
You need to make sure you have a financial plan that aligns with your retirement goals, and you can’t do that unless you identify them. That’s really where retirement planning should start. A good first step in goal setting is to try and nail down when you plan to retire. The answer will depend on a variety of factors, but once you’ve answered this question, you’ll be in a better position to identify your specific retirement goals. Some people will be more “specific” than others, but here are some general questions to keep in mind:
Do you plan to stay put when you retire or move? If the answer is move, then where to? If you’re considering several places, try to narrow it down, especially if you know the cost of living would differ greatly in one location compared to another. Once you know the place, ask yourself, “What would I primarily like to do there?” This means visualizing your day-to-day life in retirement. What would make you happy and fulfilled? Playing golf every day? Going out to dinner several times a week?
Do your goals include traveling? If so, where to, and when? Don’t think too much about how feasible it might be just yet. If you really want to do it, make it a goal.
Finally, ask yourself whether you think you’ll want to make a major purchase when you retire, like a vacation home or a boat. If so, include it as one of your goals, then write all of them down.
Now congratulate yourself; you now have specific goals, which means you can start working on a financial plan specifically designed to help achieve them!
3. Planning to Help Minimize Stress
It’s no secret that one of the most common causes of stress is money. That’s why another key to planning a more comfortable retirement is having a Retirement Income Strategy designed to help reduce financial stress as much as possible. Usually, stress stems from two things: lack of control and fear of the unknown.
In terms of investing, you deal with both of those quite a bit for most of your working life. That’s because as you’re building your retirement savings, you’re typically invested for growth in the stock market. When that’s the case, you have little control over your investments, and you never know when the market might take another downturn.
That’s stressful even when you’re in your 30s or 40s and still have time to recover from a financial loss. It becomes much more stressful in your 50s and 60s when you not only lose that time but will need your money to start generating income soon. Luckily, the solution to this problem is mentioned in the problem: income.
Once you shift your financial focus from growth to income, you’re typically invested in strategies less vulnerable to market volatility and designed to help generate reliable income return through interest and dividends. Strategies, in other words, that help to eliminate or minimize those two main sources of stress: lack of control and fear of the unknown.
4. Planning From 30,000 Feet
It’s no secret people are living longer. That’s great, but it creates challenges. One of the biggest involves retirement planning, and the simple fact that people need to plan for longer retirements. If you’re a couple in your mid-60s today, there’s a good chance at least one of you might live into your mid-90s. A lot can happen in 30 years, which is why it’s important to have a financial plan that covers the full scope of those years and accounts for every challenge.
Some of those challenges are easy to foresee—things like maximizing your Social Security, minimizing taxes, and satisfying your Required Minimum Distributions. These are issues every retiree must deal with—but if you have a plan designed to deal with them for the next 20 years and you live another 30 years, that could be a problem! What’s more, there are other challenges that a plan with limited scope might miss altogether, like the true impact of inflation and the risks of spending down principle. You should be planning from 30,000 feet, not 1,000.
So, what do I mean by “planning from 30,000 feet?” Well, that’s based on the following analogy, which I often use to explain the difference between most ordinary financial advisors and those that specialize in retirement income: For a pilot flying at 1,000 feet, the horizon line is 40 miles away. However, for a pilot flying at 30,000 feet, the horizon line is over 200 miles away. By flying higher, the pilot sees farther.
Figuratively speaking, most people only fly at 1,000 feet; they don’t typically see more than five to 10 years into the future, and that’s also true of many financial advisors with conventional, growth-based business models. Part of it is psychological, but it’s also a matter of experience. Income Specialists, on the other hand, are uniquely qualified to identify all the issues relevant to long-term financial planning. In other words, qualified to provide you with another important key for planning a comfortable retirement!
5. The Importance of Flexibility
When I talk about having a financial strategy that’s “flexible”, I don’t mean one that you can change on a whim. I mean, with the help of the right advisor, creating a strategy you can adapt as needed based on changes in your life. We all know that the only constant in life is change. Your situation, your goals, even your risk tolerance may change, and it’s important to have a strategy that can adapt to those changes.
Equally important is having a strategy your advisor can adapt on your behalf to help minimize risks and maximize opportunities in all market conditions. The financial markets are constantly changing, and we’ve seen some big changes recently with rising interest rates. An Income Specialist uses diversification and active management strategies to help ensure you’re getting greater protection and greater return even in the face of rising interest rates or any other challenges that may emerge.