Have you imagined running out of money during retirement and going back to work? You can prevent this nightmare scenario by preparing for your golden years in the present moment. The assistance of a fiduciary CERTIFIED FINANCIAL PLANNER® Planner will prove invaluable as you plan your financial future.
Let’s take a quick look at six financial planning steps that your CERTIFIED FINANCIAL PLANNER® Planner can review with you in detail to ensure you do not run out of money after departing the workforce for good.
Reduce Risk as You Near Retirement
If you are in your 50s or 60s, now may be the time to reduce your investment risk. Consider shifting your money out of high-risk stocks to stocks with lower betas (meaning less volatile stocks), ETFs, mutual funds, CDs, bonds, and money market accounts.
Furthermore, the years ahead of retirement may also be the right time to reduce your exposure to stocks as a whole. Low beta stocks, ETFs, and mutual funds consist of stocks, meaning they may be inherently riskier than CDs, money market accounts, bonds, and even some real estate investments. Mitigating risk is essential to safeguarding your nest egg as you near retirement and also during retirement.
Diverse Income Streams
Wouldn’t it be nice to have several passive income streams as you progress through your golden years? Plan accordingly with the assistance of a fiduciary financial advisor and you will be on track to enjoy exactly that. Passive income streams are available through stock dividends, rent from real estate properties, bonds, annuities, and several other sources. This passive income can supplement your Social Security benefit after retirement, ensuring your money outlives you.
Though the prospect of departing this plane of existence with tens of thousands, hundreds of thousands, or even millions of dollars of unspent money is a bit depressing, it is better to spend your final years enjoying peace of mind, knowing you have enough money to pay for medical care and also provide loved ones with an inheritance.
Be Honest With Yourself About Your Spending Plans
Create a budget for retirement that includes an accurate estimation of how much you will spend each month and you might find you don’t have nearly enough money socked away for a truly enjoyable retirement.
Keep in mind, Americans are living longer, meaning there is the potential that you may live into your 90s or even hit the century mark. As long as you are in decent physical shape, you will continue to spend during these years, be it on home care services, gifts for family members, or even niceties such as gourmet food.
So don’t assume you will strictly need money for housing and food after retiring. Budget in some money for recreational spending and you just might find you need to save that much more in the years leading up to retirement. Prepare accordingly and you won’t have to return to work after reaching the life milestone of retirement.
Should You Use Your Home Equity as a Stream of Income?
To say it is challenging to build equity in a house while saving/investing for retirement would be quite an understatement. Even if you were to accomplish this feat, it might not be enough in and of itself to set the stage for a rewarding retirement. Establishing equity in a house is not guaranteed to increase your net worth as property values are dynamic, meaning they change. It is possible that the value of your home will decrease. This is precisely why it might make sense to take out a reverse mortgage.
Reverse mortgages may be a solution for individuals who are lacking in income yet rich in assets. Opt for a reverse mortgage and it will pay for the healthcare you need when you are a senior citizen and also ensure you can remain in your home.
A Loan Against Your 401(k) Might not be a Good Idea
Plenty of people fall into the financial trap of taking out a loan against their 401(k). Though taking out such a loan sometimes make sense to cover the cost of an emergency expense, it is generally a bad idea. Borrowing against such a retirement account should be a last resort as there is a 10% early withdrawal penalty for those who take out such a loan when age 59.5 or younger.
Borrowers may be able to take out a loan for 50% or less of their vested account balance up to but not in excess of $50,000. Keep in mind, if you end up being laid off or if you segue to a new job, the loan balance will likely be due, creating quite the financial hole to dig out of in the years ahead when you should be planning for a relaxing retirement with the assistance of your fee-only fiduciary CERTIFIED FINANCIAL PLANNER® Planner.
Crunch the Numbers With the Assistance of Your CERTIFIED FINANCIAL PLANER® Planner
If your head is spinning when you are doing the math necessary to plan for a rewarding retirement, do not assume you have to do all the preparation on your own. A CERTIFIED FINANCIAL PLANNER® Planner can run the numbers on your behalf, helping you figure out whether you are on the path to a timely retirement and whether you will be able to permanently retire without having to pick up a part-time job.
This professional will delve into several hypothetical situations with you so you understand your financial position in a truly comprehensive manner and can pivot accordingly should you lose your job, become divorced, lose money in the stock market or receive a financial windfall.
At Prism Planning Partners, we are CERTIFIED FINANCIAL PLANNER™️ Professionals committed to facilitating important questions so that we can help you explore all of your opportunities. We offer a broad array of financial planning and consulting services for our clients-including retirement, investment, and estate planning.
Contact us today and let us illuminate your possibilities!