I recently received a 1,000-piece jigsaw puzzle as a gift
that features a lovely Colorado mountain trail disappearing into the blue sky
horizon. The puzzle itself instantly rekindled memories of childhood with my
father. Because he had a lifelong passion for puzzles, I grew up in a house
where scattered jigsaw pieces would cover the dining room table like a
cardboard construction zone. While my father always loved the process of
assembling the pieces, I’ve long been the type to enjoy just admiring the
picture on the box. The rest always seemed a little too messy to me.
The way I feel about puzzles is how many people consider
retirement planning. Their ideal picture of retirement would look wonderful on
a puzzle box, but the process of piecing it together seems overwhelming. Of
course, one can keep visualizing, but eventually it’s necessary to dump out all
the pieces and make them fit together.
If you are considering taking this important step, you have
nothing to fear. Here are six key pieces to put at the top of your retirement
planning pile that can help you enjoy the kind of financial future you
envision.
Piece No. 1: Put your plan in writing
Perhaps the most important piece is your plan. After all,
when you put your plan in writing, you have a tangible record of the path
ahead. According to a recent survey, 73% of financial professionals say
providing written plans is very important in building trust with their clients,
and two out of three consumers find such written plans effective in accounting
for their risk preferences, their investment plan and how to fund financial
goals.
From monitoring financial benchmarks to managing through
market declines, a written plan is a record of commitment that will help keep
you on track and grounded through highs and lows.
Piece No. 2: Know your biological age
The good news is you may be younger than you think. The bad
news is you may be younger than you think. A growing body of evidence suggests
that an individual's actual age can be measured more accurately using
telomeres, which are protective caps at both ends of your chromosomes. Your
biological age can diverge by as much as 10-20 years from your chronological
age, which can affect your retirement planning.
Commercial tests for determining one’s biological age
measure telomeres using a blood a sample that is compared with samples from
other members of the same age group. However, there are also numerous
calculators and questionnaires available online that can provide biological age
estimates based on several factors, including diet and lifestyle.
Longer life expectancies are one of the key factors that
have helped transform traditional retirement planning. With today’s longer life
spans, you may need to plan for more years. And more puzzles.
Piece No. 3: Protect your assets
If the thought of running out of money keeps you up at
night, finding reliable sources of retirement income that suit your needs and
risk tolerance can help. Many retirees
are losing sleep over everyday expenses and health care. In one recent study, a
whopping 87% of respondents said their No. 1 fear of retirement is having a
lack of income.
Social Security, a pension or certain types of annuities can
contribute to the guaranteed income component of a well-balanced portfolio.
Dependable income also can help you understand how much you can afford to spend
and help you feel more at ease about spending in general. And it can help
protect you against adverse consequences, such as market downturns.
Piece No. 4: Prepare for health scares
In a survey of more than 1,000 people ages 50-70 with
investable assets of at least $200,000, just half of retirees and 36% of
pre-retirees reported having a strategy on how to handle health care and
long-term care expenses in retirement. There’s good reason for having such a
plan, because the financial burden of these costs can be significant. It’s
worth noting that in the same survey, 28% of participants said the COVID-19
pandemic has led them to re-evaluate how they plan for long-term care.
For those who don’t have a health care strategy, a good
place to start could be by addressing the potential cost of long-term care in
the future with insurance coverage. And if Medicare weren’t already puzzling
enough, income withdrawals from your assets can affect your Medicare premiums,
so work closely with a financial professional and tax expert to manage your
distributions. Of course, good health care starts with great self-care, so stay
focused on what’s in your control — maintain a healthy diet, exercise more and
limit stress.
Piece No. 5: Put your income on autopilot
Many of us view the money we have accumulated as
“untouchable,” when it was actually designed to be spent in retirement. And
while the desire to avoid overspending is admirable in the discipline it shows,
it means you could be missing out on all the fulfillment you deserve in life
after you leave the workforce. To help avoid this, one option for spending more
comfortably in retirement is automation.
Automation is an effective method of saving and investing to
accumulate assets. For example, you may automatically contribute to your 401(k)
or other retirement funds. But what about using the power of automation in
retirement for distribution? Consider converting some of your assets to a steady
stream of income, and automatically activating a withdrawal plan that can help
fuel your retirement possibly without the worry of running on empty.
Piece No. 6: Follow your path with a professional
Just as important as your plan is the financial professional
who will help you execute it and lock all these pieces together. We all have a
puzzle box vision of what our retirement might be, but we can't just admire
this picture without putting in some effort first. This planning process is
what brings the picture to life, right down to the last missing piece that may
have fallen on the floor. It’s time to open the box and sort through the pile —
assembly is required.
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