Retirement Planning

Retirement planning basics

If retirement planning scares you, you are not alone! Why is it so difficult?

  • Retirement is a new world with new rules and complex financial decisions
  • Everyone is in a different financial position so there is no one size fits all answer
  • There is a fear of making poor financial decisions

Six retirement risks you must address in your plan

  1. Longevity (i.e. outliving savings)
  2. Inflation (i.e. loss of purchasing power)
  3. Unexpected (and uncovered) healthcare expenses for chronic illnesses
  4. Loss of principle during market downturns
  5. Taxes
  6. Loss of a spouse

There are other factors we cannot readily control but need to be aware of in planning. For example,

  • Changing tax rates play havoc with long term planning
  • Social Security has potential funding issues
  • Retirements are lasting 30+ years!  A lot can change in 30 years!
Longevity risks impacting retirement NC

Would you drive your car without auto insurance?

We have been responsible for insuring our health, home and automobiles, life, etc. from catastrophes but no one really ever talked about insuring our retirement. In fact, in many cases, our retirement nest egg is worth more than our homes and cars and other assets combined! It only makes sense to think in terms of protecting and insuring your retirement assets for peace of mind during retirement.

A secure retirement is nothing more than from a saving mindset to an insuring mindset!

Start planning before you retire

If you can’t cover your expected retirement expenses, you can make changes while you are working. For example:
  • Work a few more years
  • Increase your savings contribution rate
  • Cut expenses
  • Start paying off debt
  • Downsize

How will you replace your paycheck in Retirement?

  • How will my paycheck continue (i.e. lump sum, weekly, monthly, etc)? 
  • Where will it come from (i.e. annuity, pension, Social Security, 401k, IRA, savings, home equity, etc)?
  • Is it secure, reliable (i.e. is there a chance it could be depleted due to market risks or company bankruptcy)? 
  • How much will it be once I receive it (i.e any tax loss)?
  • Is it stable (i.e. does it increase with inflation)?

Why do people not plan for retirement?

Retirement planning is challenging and financial choices have to be balanced with:

  • Managing both protection and growth of assets
  • Meeting goals and desires such as legacy wishes and lifestyle wants
  • Handling unexpected medical emergencies
  • A large dose of reality (income needs vs income resources)

The biggest challenge is modifying behaviors

Changing behaviors around accumulating wealth to spending in retirement is challenging. As we age, we should be shifting from accumulation strategies that carry risk to protection strategies that minimize risk.

Finance and Retirement Raleigh NC

Retirement Phases

Phase 1

Age 25-40

Young With Guts!

During our early working years, we assume more risk for the promise of a bigger return. Time is on our side and we have less to lose!

Phase 2

Age 40-55

Financially Maturing

In our mid career phase, we begin to modify our investment strategy to balance our risk/growth objectives primarily because we have more to lose!

Phase 3

Age 55-60

Financially Conservative

During our late career phase, we actively take measures to further reduce our investment risks knowing that if things go badly, there are less options for recovery…basically time and income.

Phase 4

Age 60 Plus

Protect and Insure

As we leave the workforce, we must INSURE OUR RETIREMENT INCOME! There will be no more paychecks to buffer losses