08 Jan Retirement Planning for All Ages
As you begin the retirement planning process:
The first step in determining how best to reach your retirement goals involves simply envisioning the retirement you want. Start to bring to life the high-level goals you see for yourself once you finish working. Things to consider: at what age do I want to retire? What kind of lifestyle do I see for myself? What spending level would be ideal? Comfortable? Tenable? What sort of activities do I want to plan for — relocation, travel, a second home? What are my legacy goals?
From this initial exploratory conversation, you can begin to map out a financial plan to meet these goals.
As you approach retirement:
Keep in mind that retirement is not a singular event, after which everything will be set for the length of your financial life. Rather, retirement is the start of an ongoing new stage. Yes, there will be a specific point at which you shift away from full-time work. But your needs and goals will evolve throughout your retirement, just as they have throughout earlier stages of your financial life. This will inform your financial strategy and how to shift your asset allocation most prudently.
For instance, the initial years of retirement often include a higher spending level than anticipated. This is often a very fun time of activity, travel, or other pursuits. However, you still have years of retirement in front of you. Say you retire at age 65 and estimate a lifespan of 95–that’s another three decades to plan for, in which your portfolio becomes your paycheck. At this point you will still want growth from your portfolio, but you always want to be safe and confident that you can meet and exceed your goals. Contrast this with an older individual whose primary financial concern is preserving capital and keeping pace with inflation so that they can spend comfortably from their portfolio in order to supply their needs, but who may be less concerned with planning for travel or major home expenses.
A key tool for retirement planning is wealth forecasting analysis, which allows you to “pre-experience” the effects that different asset allocations and spending levels can have over time.