Seven Tasks To Create Your Retirement Plan

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Your checklist to see if you are retirement ready.

It’s never too early to start thinking about retirement, as those with a plan early on will find that they are more likely to have options for retirement rather than the disappointment of having to work longer than planned or trying to live on less.

Here are seven key items that you want to have determined to help you get there.

  1. Figure out what you want or need to live on in retirement. There is the 80 percent rule that says you will need to live on 80 percent of your pre-retirement income. I suggest using this number only as a starting point. If you are planning on buying a vacation home, increasing your travel or have an expensive hobby, that number could be significantly higher.
  2. Factor in expenses that may be significant and non-recurring, such as paying for a wedding, buying a new car and/or taking an expensive trip(s). If you don’t have long-term care insurance, then be sure to factor in out-of-pocket costs for long-term care should you need such care. Research suggests that long-term care can cost as much as $120,000 per year.
  3. Calculate or factor in Social Security income, but be sure to optimize the best approach to when you will start taking the income. Social Security is a guaranteed income source and by spending some time strategizing your options as to when to start drawing it, you can maximize your income over your life span.
  4. Consider and factor in other sources of income, such as the sale of a residence, an inheritance or an employer pension plan.
  5. Once you understand your income needs and additional sources of income, then you can determine the additional income that your personal investment portfolio will need to cover.
  6. See if your portfolio of investments can sustain your income needs for your lifetime. Many people are now living into their ’90s, so you may need your income to cover a long period of time. The difficult part of determining if your assets will support you involves coming up with a reasonable expected return. This expected return will depend on you and how aggressive you invest, which is extremely hard to predict. I suggest looking at historical returns and reducing those by 1 percent-2 percent as the U.S. economy may not grow as it has in the past. Then factor in management fees and taxes. This is a conservative approach, but in my opinion, it is better to be cautious, and you can always adjust upward if your investments do better.
  7. Finally, consult a professional to have your estate plan updated, and make sure you are properly insured.

It is hard to create a plan with so many unknowns, but it is important to tackle this as early as possible and adjust the plan as needed on a regular basis. The best way to start is to take each item at a time and work through the process.

Disclaimer: The views expressed in this article are the opinions of the author and should not be interpreted as individualized investment advice. Investment objectives, risk tolerances and the financial situation of individual investors may vary. Please consult your financial and tax advisers before investing.

Susan Carr-Templeton

About Susan Carr-Templeton

Susan Templeton is the founder of Stafford Wells Advisors, a wealth management firm serving individuals, families and businesses and advising workplace retirement plans. Stafford Wells was founded in 2008 with the mission of delivering independent, complete, unbiased investment and planning advice, free of any conflicts of interest. Susan Templeton has more than 20 years experience in investment management. She received her B.S.B.A. degree in marketing from the University of Denver and her M.B.A. from the University of Chicago. Susan is a trustee for the Advocate Foundation where she chair’s the Planned Giving Committee and is a member of the Investment Committee. Susan serves on the investment committee for the Visiting Nurse Association (Chicago) and is a former trustee of the Village of Oak Brook Police Pension Plan.