The Home Stretch
I never thought it would arrive, but I am on the home stretch of a 40-year career in the financial services industry. If, like me, you are 3 to 5 years from retirement, it is crucial to take a step back and ensure you are financially prepared for the next chapter of your life.
Here are four key steps to help you optimize your retirement strategy and secure your financial future.
Calculate and Optimize Retirement Income
The first step is to create a comprehensive financial plan, if you haven’t already. This plan should bring clarity to your saving and spending patterns, and help you determine how much income you’ll need in retirement and how to generate it. Consider all potential income sources, such as Social Security, pensions, and investment returns. By understanding your financial situation, you can make informed decisions that align with your retirement goals.
Assess Risk and Rebalance Investments
One of the most critical risks to consider as you near retirement is the "sequence of returns" risk. This refers to the risk of experiencing negative investment returns during the early years of retirement, which can significantly impact your portfolio's sustainability. A bear market right at retirement could deplete your savings faster than anticipated. To help mitigate this risk, evaluate your asset allocation and consider rebalancing to reduce exposure to high-risk investments. This may involve shifting from stocks to bonds or other more stable assets. Regularly reviewing and adjusting your portfolio can help protect your savings from market volatility.
Consider Increased Healthcare Costs
Healthcare costs often rise significantly in retirement, so it’s important to plan accordingly. Research potential medical expenses and consider purchasing supplemental insurance to cover gaps in Medicare. Additionally, explore long-term care insurance options to help protect against the high costs of assisted living or in-home care. By anticipating these expenses, you can avoid financial surprises and help to ensure you’re adequately covered.
Create or Update Your Estate Plan
Having a well-structured estate plan is crucial to help make sure your assets are distributed according to your wishes. This includes creating or updating your will, setting up powers of attorney (POAs) for financial and healthcare decisions, and considering trusts to manage your estate. Working with an estate planning legal professional to develop an estate plan not only helps to provide peace of mind but also helps to reduce potential legal and tax complications for your heirs.
Taking these proactive steps can help you enter retirement with confidence and security. Remember, the journey doesn’t end once you retire; it’s just the beginning of a new and exciting chapter of your life!
Plan Your Next Chapter
Transitioning into retirement doesn't happen overnight. A well-thought-out financial plan can help to provide the tools you need to move to your next chapter with confidence and peace of mind.
Not sure if you are ready for the next phase? Feel free to connect with me on a complimentary strategy call* and let's discuss your retirement plan and explore ways to provide the income necessary to maintain your lifestyle throughout retirement.