Planning for Retirement – What You Really Need To Know.

by TheProAdvisor on October 22, 2009

RetirementPlanning for retirement requires different strategies before and during retirement.  Unfortunately, this simple fact is not understood by many financial advisors.  That is why it is important for you to work with a “Financial Professional” who understands retirement planning if you are retired or nearing retirement.

Shifting Concerns in Retirement

Prior to retirement, your main financial concern should be accumulating as much wealth as possible.  You want the greatest growth on your assets.  Growth is more important than income, especial when taxation is considered.  The risks you are willing to take with investments for retirement should be based on how far away your retirement is.

During retirement, your investment objectives shift from accumulation to preserving principal and maximizing income.  Unfortunately many advisors plan their client’s retirement as if it were a single stage of life.  Nothing could be further from the truth.  Retirement can last for more than 30 years.  Your lifestyle, needs, and the risks you face will certainly change during those three decades.

The Four Stages of Retirement

It is helpful to think of retirement in four basic stages.  They are:

  • Pre-retirement – the 10-15 year period leading up to your retirement.
  • Initial retirement – this normally lasts 5-10 years and is often marked with reconnecting with family, travel, starting a new business venture, or devoting time to hobbies .
  • Seasoned retirement – typically lasts between 10 and 30 years.  Although some of the novelty of retirement may have worn off, many retirees experience an increasing level of contentment during these years.
  • Mature retirement – This is normally the last few years of retirement and may require things like long-term care or nursing home care, assisted living, or the loss of independence due to disability or illness.

Financial Risks in Retirement

Today’s retiree faces multiple risks to their long-term financial security.  While these risks are varied, the following challenges are the most common:

  • Inflation – or the changing value of money.
  • Investments  – or whether or not your invested funds are both secure as well as earning at the level you need
  • Loss of a spouse –  or whether your retirement income will continue to provide adequate support for a surviving spouse
  • Health and frailty – or your ability to pay for health care, long-term care, or nursing home costs – either planned or unexpected
  • Longevity – or your ability to ensure your retirement plan provides you an income stream that lasts a lifetime…no matter how long life may be.

Meeting these challenges requires planning and action.  A “Financial Professional” who understands retirement income and retirement planning can help you manage these risks.

Working with a Financial Professional

With the help of a dedicated “Financial Professional” you can effectively manage your retirement.  Several topics that you will want to discuss with your advisors include:

Keep in mind, with financial planning, time is your best friend or greatest enemy.  The longer you wait the further away your retirement goals and objectives become.  And remember, there is never a good reason to wait on improving your financial future.

{ 3 comments… read them below or add one }

E Paul Lian October 23, 2009 at 7:27 AM

Ryan, I like it…your article. It’s kinda interesting how all of this works. I went in to a semi-retirement mode in 2000, after spending the previous 25 years helping people accumulate the assets on which to retire. Now I’m in the same boat as everyone else, trying to distribute these assets back to myself. I like the phrase: “It’s NOT the return on your money that’s important…it’s the return OF your money”.

I cashed out my renewal income a couple years ago and am living off my 401 k. My wife Chris passed away, her life insurance proceeds now fund my gifting to charities and to our three children and nine grandchildren.

The lessons I’ve learned? Be flexible, none of knows what’s just around the corner.

Continued success in our GREAT business !

Ryan October 23, 2009 at 5:25 PM

Hi Paul! Thanks for the great addition. It is a fundamental flaw that people have been trained to look only at the rate or return or the interest rate provided. While these are obviously important components, they are not the only factor that needs to be considered. Other factors like taxes, inflation, and unexpected expenses can quickly erode any return provide and even the underlying principal.

A good friend of mine and fellow MDRT Top of the Table member recently wrote this about our industry:

“Let me be clear: We do not make people rich. We prevent them from ever being poor. Our industry must never lose sight of that.”

Van Mueller – “Winning by not Losing”
Senior Market Advisor – Oct 2009

Truer words may not have ever been spoken about our industry!


A Fan November 2, 2009 at 4:38 PM

Whoa! That new banner image is PIMP!!

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