The Retirement Puzzle

Planning your financial future is your responsibility. In today’s changing economic environment, it’s never been more important to know whether you are on the path toward financial security in retirement. Hope and timing is not a strategy.

The most difficult aspect to plan for is the unknown. American retirees will always be looking for a solution to the retirement income-planning puzzle. You have worked hard to nurture and cultivate your nest egg. Now your biggest question is, “How do I spend my money yet not run out of it in retirement?” As retirement planning experts, we want a plan that gives our clients the best chance for success.

3 Key Solutions for Your Retirement Puzzle

1. Converting Wealth Into Income
Retirement shouldn’t mean cutting back on your favorite pleasures. Whether your favorite hobby is playing golf or working in your garden, retirement should be about enjoying what you love. However, many retirees find themselves worried about money and concerned that they won’t have enough to maintain their ideal retirement. With proper planning and execution, however, retirement can be your time to enjoy the hobbies and activities you’ve pushed to the back burner during your working years. Throughout your working life, you’ve received a paycheck on a set, regular basis, and you probably knew exactly how much each check was going to be. Now, you’ve retired and rolled over your 401(k) and other retirement plans into an IRA; you saved diligently and have accumulated wealth within your plans… now what?
Every retiree must customize his or her solution to provide a steady stream of income by using a defined strategic process and realistic assumptions. Your key objectives must be to maximize income, increase investment options, maintain liquidity, and protect your principal. The retirement funding problem should be viewed as a two-phased approach: accumulation and spending.

Most people understand that there are differences between these two phases of the retirement process. However, the prevailing methodology for the spending phase uses static models that simply extend the investment portfolio of the accumulation phase. These models either continue with a fixed proportions portfolio or a decreasing equity portfolio. The whole idea of an optimal retirement is to draw income from savings that have accumulated over time without having to continue working for wages.

2. Generating Your New Paycheck
Once you retire, you’ll want to re-evaluate your overall asset allocation to make sure your portfolio is structured to generate the income you’ll need. Some of the investments you may want to consider at this point are:

Bonds
Dividend-Paying Stocks
Preferred Stocks
Mutual Funds
Annuities

All of these investments have unique advantages and disadvantages. As we all know, there is no perfect investment. Therefore, it is important to understand how your selected financial products fit into what you are planning to accomplish. Unfortunately, most people succumb to the siren of Wall Street and end up purchasing a financial product because it was a “hot tip” or favorite of some research department. Don’t simply buy an investment product. Completely understand and be comfortable with how it fits into your plan.

3. “The 4% Myth”
If you blindly subscribe to the conventional knowledge that has long favored the “4% Withdrawal Rule” (which states that with a withdrawal rate of 4% of the value of your portfolio at retirement, which is adjusted for 3% inflation, your money should last for 30 years), then it’s time to learn the facts.
“How much money can I withdraw on an annual basis from my portfolio without running the risk of going broke?” This is the kind of question that could keep you up at night. Volatility in the markets, historically low yields, and the fact that people are living longer, have many experts questioning the 4% safe-money withdrawal rule. Morningstar recently concluded that a retiree who wants a 90% probability of achieving their income goal and having their assets last 30 years should withdraw only 2.8% per year.
These days, people are viewing retirement as a whole new chapter in their lives—the end of one season and the beginning of something new and exciting. You need to find your “edge” and “strategy.” Your retired years are meant to be filled with the opportunity to travel to places you’ve never seen, try new hobbies you’ve never had time for, and enjoy the life you’ve worked so hard to achieve. You deserve no less.

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