Retirement Planning

 

Destination: Retirement

Retirement is typically one of the top financial goals you'll work toward. It may be the furthest out, but any good financial plan starts with figuring out how much you'll need to live on during your retirement years, putting a strategy in place to get there, and then addressing your shorter term needs.

 

 

Ongoing advances in medical care have resulted in an unprecedented increase in life expectancy over the last few decades. The average American today is living a longer life than his or her counterpart of a generation ago. This means that the average person leaving the world of full-time work at age 65 can reasonably expect to spend 20 to 30 years or more in retirement. Having the freedom to live life your way during retirement will depend, at least in part, on having a plan that aligns with your personal goals.

 

Envision the retirement you want

 

Another factor in figuring out how much income you will need in retirement is picturing how you want to spend your retirement years. Do you want to travel? Own a second home? Leave a legacy to your family, charity, or alma mater? Or, maybe you just want to live a simple lifestyle with the primary goal being to cover your basic expenses. Now's your time to think through the world of possibilities, because the sooner you start planning — and saving — the better able you are to reach your goal.

 

Time is your friend

 

Setting aside even a small amount each month can add up over time. One common and effective strategy is to use traditional retirement vehicles, such as an employer- sponsored 401(k) plan or individual retirement account (IRA), and set up automatic contributions. While each of these types of retirement accounts has unique rules, all offer tax benefits that can add up over the long term. Even if you're nearing retirement, it's not too late. If you are 50 or older, “catch-up contributions” help pre-retirees stash even more into their 401(k) or IRA than the basic contribution limits each year.

 

How should you allocate your money?

 

How you allocate the money you've accumulated — and the goal-related products you choose — are probably the most critical factors when it comes to creating a retirement plan. As mentioned, there are IRAs for retirement goals, as well as guaranteed lifetime income products, but depending on your life stage you may want to consider other solutions as well. For example, cash value life insurance could help protect your family's financial security and serve as an effective estate planning tool.

 

Diversification helps balance risk

 

Diversification can be summed up in the phrase, Don't put all your eggs in one basket. Regardless of the types of retirement product solutions you invest in, don't bet your retirement nest egg on just one. The types of products you select should vary depending on factors like your risk tolerance and retirement time horizon. These two factors work hand in hand. The further out your retirement, the more risk you may be comfortable in taking with your investments.

 

When it's time to determine the financial strategy that's best for you, feel free to reach out to one of our Wealth Management Advisors in the Savannah GA to help you map out a sound plan. In the meantime, make sure you have a clear vision for your goals so you'll be better prepared to plan your financial future.

 

Older Millennials face New Retirement Planning Challenges

The words “retirement planning” and “millennial” are not often seen in the same sentence, but the first birth year in the millennial generation was 1981. Men and women born at the beginning of that era are now hitting their mid to late thirties. Career paths have been established, marriages and children have entered the picture, mortgages and car payments have replaced student loan debt. The “golden years,” once a distant illusion, are creeping closer.

Any financial planner will tell you that the most comfortable retirement situations belong to those who started planning prior to their fortieth birthday. Far too many Americans look at their 401k or pension plan and feel that its sufficient to meet their needs when they sail off into the sunset at age 65. Thirty years of investing in equity-based retirement plans worked for the last generation. It's not sufficient for millennials.

Trading Technology has Increased Market Volatility

Growing up in the dawn years of a new millennium has instilled a sense of technological confidence in our younger generation. The days of yesteryear, when our parents and grandparents had to “walk to school” and dial a “rotary phone” are long gone. The mundane tasks of our predecessors are now accomplished by writing an algorithm or building an app. The world we live in is filled with wonders seen only in science fiction a few decades ago.

The stock market has been a beneficiary of technological advancement also. In the eighties, trading was done by financial professionals who evaluated balance sheets and market trends. Today, 70% of all trades on Wall Street are done algorithmically, and you no longer have to be a registered rep to make those trades. Apps like E-Trade and Robinhood put the power to buy and sell equities and other financial products directly into the hands of consumers.

If you pull up a chart of the market activity in the past two weeks, you'll see a line graph that looks very much like an ocean wave. We plummeted from the crest of a multi-year bull market into the depths of bear territory in a few short days, then shot back up again with a meteoric rise fueled by congressional approval of a $2 Trillion stimulus package. The end result was encouraging, but we're still likely to see more losses this year.

Retiring during a Down Market can be Devastating

Baby boomers who retired in the past five years are facing potentially devastating fallout on their retirement plan if the market ends the year down 20% or more (which is where we're at now). If you go into retirement with an equity-based 401k, pension fund, or Roth IRA, a 20% loss in principle will shorten the number of years you're able to take disbursements. If the market continues to decline, you could be looking at life on social security in your seventies. 

Millennials should benefit from equity investments now, because historically the market goes back up at some point, but what happens if another down market occurs when you retire in thirty years? Not having a diversified portfolio will leave you in the same position many of the retirees of today are facing. That's why planning properly is critical. It may seem premature, but now is the time to seek professional financial planning advice.

Diversifying with Life Insurance and Retirement Annuities

Continue to make contributions to your 401k. Hopefully your employer is matching them. If you have a pension fund, be sure to read your quarterly reports and attend pension fund meetings if changes are due to be made. These are regular tasks to ensure you have something to fall back on when you retire. You'll also want to make sure you open a savings account or money market account to build additional wealth in a low-risk environment. 

Whole life insurance policies, particularly when they are opened up at a young age, build additional cash value and can earn you dividends. This is an area where you will definitely want to consult with a professional. Insurance is a complex marketplace with multiple products and diverse options for every situation. What you DO NOT want to do is buy a policy online without going through an insurance agent. That's how folks get scammed.

Retirement annuities are another form of insurance that can provide you steady payouts during your retirement years. As with most insurance products, there are different types of annuities, each designed for a specific situation. Fixed index annuities offer market loss protection. Variable annuities are riskier, but their upside is higher. You can even do “immediate income” annuities, which guarantee immediate income within thirteen months.

Begin Retirement Planning Today    

There's a lot to digest here, but all you really need to do right now is make a phone call. Investing for those final years is not something you want to do alone. Savannah Wealth Group is a retirement planner that Savannah, GA residents can count on. We can guide you in your retirement planning and make sure you enjoy life to its fullest, both today and in the future. Start today and that will happen. Do it right, and you might even be able to retire early. Contact us to learn how.   

Call (912) 999-1805

Or Schedule a meeting that works for you 
https://calendly.com/savannahwealthgroup

 

CRN202103-244201