You’re Just 5 Steps Away from Achieving Your Ideal Retirement
First off, do the math to find out if you have enough saved to actually retire.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
It’s no mystery that building a successful retirement requires planning. What can be mysterious, however, is what the process actually looks like, leaving many aspiring retirees to guess, hope and essentially throw darts and pray a few land at least near the bull’s-eye. This is a shame; you can do better.
What can happen when retirement planning isn’t done well? What does it look like when you don’t have a solid plan carefully crafted before the big day arrives when you shut the machine down for the last time? Ironically, not much. At least not right away. The effects of a poorly structured retirement usually don’t show themselves until years later, when it’s too late to do much about it. That can be a tragedy; that’s what we want to avoid.
When I have an opportunity to sit down with families to begin planning their retirement, I suggest we immediately get to work on solving their retirement math problem: How much monthly income do you need and want, and what kinds of assets and income sources do you have in place to support these goals? In other words, how much is enough, and do you have it?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you’re asking yourself, “How much is enough?” these five steps can help get you started in solving your retirement math problem:
1. Create an inventory of your expenses.
Picture what you want your ideal retirement to look like — and think about what that will cost. Separate all imaginable expenses into “essential” (food, housing, insurance, transportation, etc.) and “discretionary” (travel, hobbies, entertainment, etc.). Another way to define your expenses is “needs” and “wants.”
2. Gather a list of your income sources.
Write down all of your guaranteed and predictable income streams, including Social Security, any employer pensions, annuities and other long-term incomes like rents from investment properties. Make another list of other financial and real assets (stocks, bonds, mutual funds, certificates of deposit, real estate, etc.) that could, if needed, add to your total after-tax income in retirement.
3. Do a comparison.
Compare your estimated essential expenses (“needs”) with your predictable income sources from Step 2. This is where you’ll find out if you have enough income to cover your costs, or if there’s a gap you’ll have to fill by other means.
4. Allocate your assets.
Having saved up assets for retirement is great; allocating and investing them in appropriate financial products can make an enormous difference in retirement success. Start by making sure your essential needs are paid for, then move on to those extras, the “wants.” If you’re coming up short, you may have to pare down your budget a bit, work longer, and/or purchase a guaranteed income product, such as an annuity, to help fill the income gap.
5. Protect against life’s unknowns, and be ready to revise your plan when needed.
Think about risk-management tools, such as health insurance, life insurance and strategies for covering possible long-term care costs. Once the pieces are in place, plan to review your overall strategy annually to make adjustments based on how your assets are performing, as well as how the world — and your life — has changed.
These five steps may seem tedious or even daunting if you’re not accustomed to regularly reviewing your long-term finances. That’s OK, because a seasoned retirement planning specialist can help guide you through this process. Before final decisions are made, the planning options can and should be stress tested under different scenarios, which can help you decide the investments that best suit your needs so you’ll arrive at your desired destination.
If you’re looking to build a planning team around you for this process, it’s important to note that people have many preconceived notions about what a relationship with a retirement adviser might look like. Too often, thoughts of hot stock tips and market predictions are considered “planning,” while the truth is much different. Good retirement planning is not a financial product pitch but instead involves building an actual written plan that is detailed, customized and adjusted over time. It’s a collaborative effort built around your needs, desires and concerns.
Begin your retirement planning process by deciding what you’d like your life to look like during retirement, and then get to work solving your retirement math problem. The steps are laid out for you here, but the truth is, the first step is yours.
Kim Franke-Folstad contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
-
Ask the Tax Editor: Federal Income Tax DeductionsAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on federal income tax deductions
-
States With No-Fault Car Insurance Laws (and How No-Fault Car Insurance Works)A breakdown of the confusing rules around no-fault car insurance in every state where it exists.
-
7 Frugal Habits to Keep Even When You're RichSome frugal habits are worth it, no matter what tax bracket you're in.
-
For the 2% Club, the Guardrails Approach and the 4% Rule Do Not Work: Here's What Works InsteadFor retirees with a pension, traditional withdrawal rules could be too restrictive. You need a tailored income plan that is much more flexible and realistic.
-
Retiring Next Year? Now Is the Time to Start Designing What Your Retirement Will Look LikeThis is when you should be shifting your focus from growing your portfolio to designing an income and tax strategy that aligns your resources with your purpose.
-
I'm a Financial Planner: This Layered Approach for Your Retirement Money Can Help Lower Your StressTo be confident about retirement, consider building a safety net by dividing assets into distinct layers and establishing a regular review process. Here's how.
-
The 4 Estate Planning Documents Every High-Net-Worth Family Needs (Not Just a Will)The key to successful estate planning for HNW families isn't just drafting these four documents, but ensuring they're current and immediately accessible.
-
Love and Legacy: What Couples Rarely Talk About (But Should)Couples who talk openly about finances, including estate planning, are more likely to head into retirement joyfully. How can you get the conversation going?
-
How to Get the Fair Value for Your Shares When You Are in the Minority Vote on a Sale of Substantially All Corporate AssetsWhen a sale of substantially all corporate assets is approved by majority vote, shareholders on the losing side of the vote should understand their rights.
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to ChanceAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
