Having a Sound Retirement Plan ultimately comes down to getting the most lifetime satisfaction from your resources. Being too conservative could result in regrets of missed opportunities and a life that was never fully lived. Whereas being too aggressive may result in running out of money before you die and potentially becoming a burden to those you care about.
I’ve learned that retirement is all about cash-flow, not your net worth. Your income determines your lifestyle in retirement. After a lifetime of hard work, ask yourself, “What is the purpose of the money?” When you are clear about its purpose, then it becomes easier to create a plan to help you achieve your purpose with the greatest amount of confidence.
Once you begin the transition into and through retirement, be sure to think differently about your investments. In retirement you are shifting out of the accumulation phase of your life and into the preservation and distribution phase. One of the biggest mistakes we see people make is continuing to invest in retirement the same way they invested during their working years. Remember, ultimately, time is the cure to the volatility of the stock market. The more time you have, then the more risk you can afford to take. Time is also the one asset you have less of as you transition through retirement. Therefore diversification becomes a two step process: first diversifying your time horizon and secondly, using the right financial tools to compliment each segment of your plan.
In order to solve for cash-flow, you need to know your retirement income floor. Your retirement income floor is the minimum acceptable cash flow you must have to pay for life’s necessities. These income sources should be non-negotiable and very secure. You must have enough income, adjusted for inflation to cover your basic expenses.
Having a good retirement plan creates a greater sense of confidence and it will allow you to respond with greater clarity about what is truly most important in your life. My hope is that by having a sound retirement plan you will experience a greater sense of freedom as you transition into and through retirement.
This article was also featured in the June/July WestSound Home & Garden.