Some different perspectives on planning. The information below was taken from two articles, one by Lori Pinkowski and the other by Joel Steele. Information on the two authors is at the end of the post.
There’s an old saying, “A journey of 1,000 miles begins with a single step.” You may find it helpful to break retirement into three phases. They are: Getting to retirement, staying retired and planning for after retirement. Once you break retirement planning into three separate phases, you are likely to have more success each step up the way.
If you break your plans, goals and concerns into individual actions or steps, you are more likely to have success in all three phases while minimizing your anxiety over your financial condition.
Phase 1: Getting to Retirement: Physically retiring is an act, not a phase. Getting to retirement means having the current financial means to support your expenses and lifestyle without any earned income.
The most common question people ask is, "How much do I need for retirement?" There of course is no single right answer. When you meet with a financial planner and you feel that your information is being put into a template, challenge their procedures.
How much do you believe you need and this really depends on how much you spend. Some of us are more frugal than others, so it is important to begin evaluating your situation at least three years before your retirement date. Because very few of us have economic training or even more than just a passing familiarity with budgeting, we tend to overestimate the amount we may need, therefore it may be valuable to track how much you spend leading up to your retirement.
It is important to have a current financial plan completed, usually this is done at no cost by some financial advisors. However, you need to remember that the financial planner may offer you this service, because they want to sell you their product. I would advise going to a financial advisor that has a fee for the service, you may get more unbiased recommendations arising from the plan. Your plan, completed by both a fee for service or a no cost financial plan, should be the same from each advisor. It is the recommendations arising from the plan that you have to be careful about when you are working with an advisor that gives you "free advice".
Your plan should include all of your assets, liabilities, pension, and incomes, as well as taking taxes and inflation into account to ensure you know the amount needed or are able to withdraw from your portfolio. In the next post we will examine Phases two and three
Joel Steele is co-owner of Steele Financial Solutions, recently voted Best of South Jersey. Reach him www.steelefinancialsolutions.com
Lori Pinkowski is a portfolio manager and senior vice president, private client group, at Raymond James Ltd., a member Canadian Investor Protection Fund. She can answer any questions at lori.pinkowski@ raymondjames.ca