Approaching Retirement
You may not be ready to retire yet, but perhaps you're at a point in your life where retirement is no longer just a distant goal. As you start to think more seriously about retirement, we offer the following checklist that may help point out potential problems, issues you may have overlooked, and ways to help you arrive comfortably and securely at your destination. You're approaching a critical stage, and an oversight in your finances now could mean postponing your retirement, curtailing your lifestyle, or having to work during your retirement years.
The questions below can help you prepare for a detailed conversation with your First Investors registered representative and give you an idea of some issues you might want to discuss. They are not intended to be a comprehensive “to do” list or the basis of a financial plan.
Income and Expenses:
- How much income will you need?
- Many experts suggest a target of 70 – 85% of your pre-retirement income.
- Where will your money come from?
- You should have a precise estimate of how much you can expect from sources such as pensions, Social Security, and savings.
- Have you determined the best way to use your assets?
- It might be a good idea to begin thinking about how you want to siphon money from your various accounts, annuities, and investments to pay for your monthly living expenses. Review distribution options from any employer-sponsored Plans, and determine which ones to use first. Many accounts require that you begin taking distributions by age 70½, while others allow you to leave assets untouched, so they can continue to grow tax-deferred.
Assets:
- Are you sure you have an accurate picture of the assets (and liabilities) you have accumulated?
- Your registered representative is available to help you calculate your net worth.
- Are your investments still conforming to your chosen asset allocation strategy? And have your risk tolerances changed over the years?
- Markets can change your investment mix. Also, your risk tolerance can change and so can your time horizon. Periodically review and make adjustments as needed.
Don't forget
- Inflation should be factored into any calculations you make about your financial future. The money you have today will not go as far tomorrow. Over the past 20 years, the cost of living has increased by about 3% a year, on average. If this trend continues, each dollar you have saved up will only buy 55 cents worth of goods or services in 20 years.
- Don't forget to factor in the biggest drain of them all: taxes. For example, if you need $30,000 a year to live on and have an average taxation rate of 25%, you need $40,000 before taxes.
- Also, estate taxes can dramatically reduce the amounts that your family and heirs may receive (by as much as 55%).
- Your personal information and documents should be well organized: identifying items, locations and contact people for each asset. By creating such a list, you will enable yourself and your family to more easily stay on top of matters.
You don't have to handle all of the items on this checklist alone. As you approach retirement, your First Investors Representative will be happy to guide you through many of the financial decisions that you will be facing. Together you can plan for the future with confidence.
