5 Key of Retirement Planning Steps to Take


Retirement planning is a multi-step process that evolves over time. To feel comfortable, safe and fun, you need to create a financial cushion that finances everything. The funniest part is why you have to pay attention to the more serious and potentially boring part: plan how to get there.

Retirement planning starts with thinking about your retirement goals and how long you should achieve them. Then you need to look at the types of retirement accounts that will help you raise money to fund your future. If you are saving that money, you need to invest in growth.

The last surprising part is taxes: If you have your pension accounts in the year of credit, you have a large tax account associated with these savings. There are ways to reduce your retirement account to save for the future and continue the process when that day comes and you retire.

Here we solve all these problems. But first, learn the five steps everyone should take to create a solid retirement plan, regardless of age.


  • Retirement planning should include time horizons, cost estimates, calculation of required after-tax returns, risk tolerance assessment and real estate planning.
  • Start planning for retirement as soon as possible so you can take advantage of the power of the connection.
  • Young investors can take risks when investing, and those preparing for retirement should be more careful.
  • The pension plan changes during the year, which means that the portfolio needs to be reviewed and the wealth plan updated where necessary.

1. Understand Your Time Horizon

Their current age and expected retirement age form the basis of an effective retirement strategy. As it lasts from now until retirement, your portfolio may carry more risk. If you are young and over 30 years old before you retire, you should invest most of your assets in riskier investments than stocks. There will be volatility, but stocks have long outperformed other stocks such as bonds. The keyword here is “long,” which means at least 10 years.

To maintain your purchasing power after retirement, you also need a higher return on inflation. “Inflation seems deep. It starts in the small days, but with enough time, it can turn into a strong oak,” said Chris Hammond, Tennessee, financial advisor and founder of RetirementPlanningMadeEasy.com.

“We all hear – and we like – the difficult growth of our money,” Hammond added. “Well, inflation is like a ‘binding wave’ because it reduces the value of your money.” A seemingly low inflation rate of 3% will reduce the value of your savings by 50% in 24 years. That doesn’t work. A lot every year, but long enough, it has a big impact.

In general, the larger you are, the more you should focus your portfolio on income and wealth. This means higher distributions and less risky securities, as well as bonuses that do not provide income to stocks, but are less volatile and provide income that you can use to live. Don’t worry about inflation either. A 64-year-old who retires next year will not have the same problems raising the cost of living as a younger professional who has just entered the job market.

You need to divide your retirement plan into several parts. Suppose one parent wants to retire after two years to pay for the education of an 18-year-old and move to Florida. From the perspective of the retirement plan, the investment strategy is divided into three stages: two years before retirement (still making contributions to the plan), aging and paying for school and housing in Florida (regular retirement to pay for living expenses). ). A multi-level retirement plan should include different time horizons and the associated liquidity needs to determine the optimal allocation strategy. You should also balance your portfolio over time as your time horizon changes.

2. Determine Retirement Spending Needs

By having realistic expectations about your retirement expenses, you can determine the size of your retirement portfolio. Most people estimate that when they retire, their annual expenses will be only 70-80% of what they used to spend.

Such a starting point is often unrealistic, especially when a mortgage loan is not paid or unforeseen medical costs are raised. Retirees sometimes also put their first year of travel or other goals on their wish list.

“Retirement savings are enough for retirees. I think that proportion should be closer to 100 percent,” said David G. Niggel, founder, president and CEO of CFP, ChFC, AIF, Litilz Key Wealth Partners LLC. , Goodbye. “The cost of living is rising every year, especially the cost of medical care. People are living longer and want to live until retirement. Retirees need more long-term income, so they have to save and invest accordingly.”

Because retirees by definition don’t work eight hours or more a day, they have more time to travel, visit, shop, and do other worthwhile activities. Accurate goals for your retirement expenses will help you plan because you need to save more in the future to spend more now.

“One of the factors in your retirement portfolio, if not the biggest, is the retirement rate. Invest in yours.” he wants to retire, “said Kevin Michels, CFP, EA, financial planner and president of Medicus Wealth. Planning in Draper, Utah.

When planning your retirement, you should also consider longevity so that you do not overestimate your savings. Average life expectancy increases

In addition, you may need more money than you think if you want to buy a home or finance your children’s education after retirement. These costs need to be considered when designing an overall retirement plan. Remember to update your plan once a year to make sure you save.

“The timeliness of retirement planning can be enhanced by identifying and estimating early retirement activities, calculating unexpected average retirement costs, and predicting what will happen when medical expenses occur next. retirement, ”explains Alex Whitehouse, AIF, CRPC, CWS. , President. and CEO of Whitehouse. . Property Management in Vancouver, Washington.

3. Calculate After-Tax Rate of Investment Returns

Once the expected time horizon and cost requirements have been determined, the actual after-tax income must be calculated to assess the ability of the portfolio to generate the required income. It is generally accepted that a required return above 10% (pre-tax) is unrealistic, even for long-term investments. As you age, this return threshold decreases because low-risk retirement portfolios are largely made up of low-yielding fixed-income securities.

For example, if a person has a retirement portfolio of $400,000 and an income claim of $50,000, assuming the tax portfolio balance is unprotected, they expect to earn an excess return of 12 .5%. The main advantage of planning for early retirement is that the portfolio can be expanded to maintain a realistic income ratio. For a $1 million retirement investment account, the expected return would be a reasonable 5%.

Depending on the type of retirement account you have, investment earnings are generally taxed. Therefore, the current yield should be calculated after tax. However, determining your tax status when you start withdrawing money is an important part of the retirement planning process.

4. Assess Risk Tolerance vs. Investment Goals

Whether you or a professional fund manager are responsible for making investment decisions, good portfolio investment that balances risk aversion and return goals is undoubtedly the most important step in retirement planning. How much risk do you have to reach your goals? Should part of the income be used for necessary expenses and risk-free tax costs?

You need to make sure you are comfortable with the risks in your portfolio and know what is necessary and what is a luxury. “Don’t be a ‘micro-leader’ when responding to everyday market noise,” advises Craig L. Israelsen, portfolio designer at 7Twelve in Springville, Utah. Helicopter investors tend to ignore their portfolios. If the years of the different mutual funds in your portfolio are different, add money. It’s a bit like parenting: the child who needs your love the most deserves it the least. wallets, etc. A mutual fund that you are not happy with this year may be the best result for next year, so don’t invest in money.

“Markets go through long cycles of ups and downs, and when you’re investing money that you don’t have to touch for 40 years, you can afford to see the value of your portfolio go up and down in those cycles,” says John. . R. Frie. , CFA, Chief Investment Officer and Founder of Crane Asset Management LLC in Beverly Hills, California. “If the market goes down, buy, don’t sell. give up the panic If the shirt sold out 20% off you would buy it, right? And what about stocks when they sell 20% cheaper?”

5. Stay on Top Estate Planning

Asset management is another important step in a full retirement plan, and each element requires the skills of certain professionals in the field, such as lawyers and accountants. Life insurance is an important part of the housing and retirement planning process. A proper estate plan and life insurance will ensure that your property will be distributed as you wish and that your loved one will not have any financial problems after your death. A well -planned plan will help you avoid the costly and often lengthy testing process.

Tax planning is another important part of the home design process. If a person wants to leave a relative or a charity, the taxes resulting from the gift or inheritance should be compared.

A common way to invest in a retirement plan is to generate income that records the annual cost of living that adjusts for inflation and maintains the value of the portfolio. The wallets are passed on to the beneficiaries of the deceased. You should contact a tax expert to determine the appropriate personal plan.

“The face of assets is changing the lives of investors,” said Mark T. Hebner, founder and CEO of Index Fund Advisors Inc. Based in Irvine, California, and author of Index Funds: The 12-Step Recovery Program for Active Investors. “It’s not about that. If you are starting a family, trust can be an important part of your financial plan.

“Later in life, when you decide to spend your money, that’s the most important thing in terms of costs and taxes,” Hebner added. “Working with an attorney on a rented housing plan can help design and maintain an overall financial plan.



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