The Importance of Having a Comprehensive Retirement Plan: In this episode of Your Life, Your Money, Michael Sheppard, CFP®, CPFA, CEPA, Group Vice President at Thrivent, discusses a Retirement Readiness Survey by diversified financial services leader Thrivent. Michael reviews the importance of having a comprehensive retirement plan. In addition, he discussed the below pieces of advice that may be helpful at any stage in the planning process.
1) Establish a retirement timeline with your desired outcomes in mind.
Before people can develop their retirement strategies, they should think about their timeline, which ultimately depends on the outcomes they’re hoping to achieve. It’s common to prioritize the math and just think about the total amount that needs to be saved in order to retire comfortably. But it’s equally important to think about how that money will be used and spent over the years.
As people start to think about their timeline, here are a few helpful questions to serve as a guide:
- How many years are they planning for? People should factor in personal health considerations and circumstances that may affect this.
- Where do they want to live? This could depend on a variety of factors, including wanting to live near family, type of home and cost-of-living considerations, and accessibility to health and caregiving facilities.
- What passions will they pursue? Ending a career opens up new possibilities for people to think about their role in community and how they want to use their time and talents.
How will they distribute their assets over time? People spend their working years building up their nest eggs, but if they don’t have a distribution plan, they’ll be sitting on what they’ve worked so hard to accumulate.
Once people have done this important legwork, they’ll be in a great position to meet with a financial advisor who can help them review their assets and figure out how they can use money as a tool to achieve their desired retirement outcomes.
2) Gather an inventory of what you have – and identify potential gaps.
For many people, the next step in building their retirement strategy will involve taking an inventory of what they currently have, which will also expose any gaps they have yet to fill. At Thrivent, we believe this is best done in partnership with a financial advisor who can help ensure people are getting the most comprehensive picture of their finances.
During this phase, people should assess all aspects of their finances, including reviewing their investments, employer or pension benefits and guaranteed income sources. It’s never too early to start planning for healthcare, either. Along with their spouse or partner, people should try to prioritize getting regular check-ups so they can start to forecast what their future healthcare expenses may look like.
3) Consider different scenarios to stress test your retirement strategy.
Because there are many variables and assumptions involved in planning for the future, people should consider the different scenarios that may impact their strategies and distribution plans, including: Taxes, Inflation, Health events, Longevity, Possible market downturns, and Other roadblocks, including debt, spending shocks or loss of a job.
A financial advisor can help people forecast how these variables may impact their strategies and work with them to build in some flexibility into their plans, including exploring financial solutions that may help buffer against possible losses.
4) Execute your strategy.
For those who are approaching retirement or are already retired, their focus will turn from accumulation to distribution, as they figure out how to manage withdrawals from their accounts to meet their everyday needs. Now being on a fixed income, people will need to consider how their money will fit into their budget and expenses, while keeping enough room to pursue other passions.
5) Review your strategy regularly to ensure you’re on track.
Just like a broader financial strategy, thinking about retirement is never “one and done.” People’s retirement outcomes may change as they advance in life and in their careers, and their financial circumstances may ebb and flow, too. People should review their retirement strategy on a regular basis with their financial advisor so they can determine if they’re still on track or if they need to make any modifications.
As Thrivent’s survey revealed, there are many challenges that come with planning for retirement in today’s environment. But it also presents people with an incredible opportunity to uncover what’s most important to them. It’s a time to consider how money decisions can help people achieve their most important goals in a way that truly aligns with their values. This level of planning will bring people one step closer to achieving financial clarity, enabling lives full of meaning and gratitude.
Watch this video to learn about the importance of having a comprehensive retirement plan and find more episodes of finStream’s Your Life, Your Money at this link: https://www.finstream.tv/videos/your-life-your-money/