Ask The CFP® Practitioner
Question: My husband is in his early sixties and I am in my late fifties. We are looking forward to retirement in a few years. What should we be thinking about now, before we stop working?
Answer: Congratulations, assessing your situation before you actually retire increases the likelihood that you and your husband will have a smooth transition into the next phase of your lives. Advance planning is very important because there are so many unpredictable variables in the retirement planning equation.
Preparing for the future would be much less complicated if we knew how long retirement would last. The process is much like trying to plan a road trip without knowing the price of gas, what tolls you might have to pay, or how long you’ll be on your journey.
In the simplest sense, financial planning allocates resources for a certain number of years in order to maintain a desired lifestyle. This exercise is problematic at best because of ambiguous factors including interest rates, taxes, inflation, market returns, and health care issues. This is why financial planning is both an art and a science.
Having a plan based on logic helps to provide a purpose and peace of mind. To increase the probability that you’ll meet your financial goals in the future, start by considering these issues:
1. Save aggressively while you’re still working and have earnings, 2. Consider what you want out of retirement and prioritize—is it more important to travel, buy a boat, or start a new business? 3. Take inventory of where you are now, and make sure your retirement lifestyle will be covered, 4. Decide if you will work during retirement, or if you need to delay retirement for a few years,
5. Determine an appropriate asset allocation for your goals and changing risk tolerance, 6. Research Medicare options so you’ll be ready to enroll by age 65, 7. Think about long-term care insurance and any care you may need later in life,
8. Estimate Social Security benefits and assess the best time to begin drawing funds from this source. Understand Full Retirement Age (FRA) and how it applies to you, 9. Work with your team of financial advisors (CPA, Estate Planning Attorney and CFP®) to determine a tax-efficient withdrawal plan for your portfolio, 10. Discuss estate-planning wishes with your children; update your will, Living will, and power of attorney, if necessary.
The Social Security System determines your Full Retirement Age. FRA is the age that you’re entitled to receive full or unreduced retirement benefits. If you were born between 1943 and 1954, the earliest you can start receiving reduced Social Security benefits is age 62. At age 66, you can receive your full retirement benefit. “Almost 66” won’t get you the full benefit amount. Visit www.ssa.gov/retirement/1943 for the details.
This isn’t the time to make rash changes to your portfolio in an effort to make up for lost ground. Investment decisions and allocations should always reflect your timeline and tolerance for risk.
Addressing these matters prior to actually retiring and continually monitoring your circumstances as you cruise along Route 66 will help you truly embrace a more peaceful and purposeful life. Close relationships and financial stability contribute to happiness more so than material objects. Stay focused and invest accordingly.
This information is general in nature; it is not a complete statement of all information necessary for making an investment decision. Opinions expressed herein are those of the author and subject to change at any time. Information obtained from outside sources is believed to be accurate. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. No investment strategy can guarantee success.
“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S.”
This article provided by Darcie Guerin, CFP®, Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041,[email protected] or www.raymondjames.com/Darcie. Please contact Darcie with any questions you would like to have answered in this column.