Americans Need To Stop Winging It With Their Retirements

If your goal after a lifetime of hard work is to enjoy a good or even great retirement—one where you can do more than just pay the bills and survive—then sound retirement planning is a necessity.

In my experience, though, too many people aren't really planning for their retirements—they're just winging it.

If there's any situation where "just winging it" is a bad idea, it's retirement.

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When I talk about sound retirement planning, I mean more than stashing away money in an individual retirement account or 401(k). Sure, saving money is important if you want to accomplish your retirement goals. You want to save as much as possible.

But saving money is just one aspect of a retirement plan. It's not, in and of itself, a plan.

For anyone who is about five to 10 years away from retirement, here are a few things to consider to help you keep on track when working to meet your retirement goals:

Gauge now whether you'll have enough money to cover expenses.

Tally up the income you'll have when you retire. Some sources of that income could be Social Security, a pension or rental income. Then, figure out what your approximate monthly expenses will be.

Obviously, if you figure up $10,000 worth of monthly expenses, but just $5,000 worth of monthly income, you have some work to do between now and the time you actually retire to see if you can close that gap. Something has to give. Without enough income, you don't have a retirement.

Don't forget taxes and inflation.

In a sense, you may not have saved as much for retirement as you thought. Over the years, you may have squirreled away money in an IRA or 401(k), deferring taxes on those dollars in the process. Unless you've placed your assets in a Roth IRA, when you start withdrawing that money, Uncle Sam will want his share, so every dollar won't be available to you.

By the same token, inflation can chip away at your spending power. As you determine what kind of retirement you can expect to have, you need to take taxes and inflation into account. Otherwise, you could be in for a rude awakening.

Consider avoiding market volatility in your portfolio.

On more than one occasion, I've sat down with a new client who's just a few years from retirement and immediately saw that their portfolio was exposed to market volatility. One bad dip in the market, and their retirement plans could go sour quickly. Generally, those nearing or in retirement place their assets in more conservative products and strategies to avoid taking such risks at that point in their lives.

As you close in on retirement, you don't want all your years of planning to be undone by a bear market, so it's important to consider your risk tolerance when allocating your retirement assets. If you're 35, you have three decades or more to recover from a downturn in the market. If you're 60, you have a lot less time left, and it's tough to recover from a major loss.

Have an estate plan.

Maybe it's just an unwillingness to think about dying, but too many people don't have a good estate plan. By working with an estate planning attorney, though, you can build in a lot of protection for the next generation.

If you have a trust that's properly set up, you can avoid probate with the assets in that trust. You can also mitigate the estate taxes your beneficiaries might pay.

If you start thinking and planning well ahead of time, you and an adviser can come up with a solid retirement strategy that can make a big difference in the amount of money you have for retirement and the enjoyment you will get out of those later years of life.

Winging it won't be necessary.

Derek Gregoire, investment adviser representative and insurance professional, is co-founder of SHP Financial in Plymouth, Massachusetts, and host of the radio show "Retirement Road Map."

Ronnie Blair contributed to this article.