Most experts will agree that retirement planning is an absolutely essential consideration for people in their 50’s. You’re at a phase in your life where your earning potential is excellent, and many opportunities to help your retirement nest egg grow are still very much at your disposal. Many experts will also be quick to point out though, that when you’ve reach your 50’s it’s a good time to begin to think about your retirement investing options a little more conservatively.
Retirement planning is something that is best started earlier rather than later. However, if you’re reading this because you didn’t start earlier, and you’ve begun to feel desperate, don’t! Stop, take a deep breath, and above all, keep your cool. Retirement planning is something that should be done judiciously and with great care. Making foolish investment decisions out of desperation is a good way to turn a small fortune into an even smaller one.
In general one should think of investing their retirement nest egg as an exercise in wealth preservation and not wealth generation. Certainly you should be able to expect a reasonable rate of return for your investments, but the days of retirement calculators that predicted regular annual returns of 8% or 9% died with Lehman Brothers and the last boom economy some time back in 2008.
Here are some simple steps to follow in creating a sound retirement investing strategy, and making retirement something to look forward to, instead of something to dread.
Assess your current financial situation. Much like when you are planning a car trip, the first step in plotting your course is to know your starting point. Begin by taking a full financial inventory, both assets and liabilities. There are several reasons for this step; you’ll need this information whether you plan to go it alone or engage a financial planner, it will help you identify assets that aren’t generating appropriate returns, and it will identify places where you may have ‘bad debt’ that should be addressed sooner rather than later.
Look at your current lifestyle. Another excellent early planning step is starting to make adjustments now, instead of putting them off until later. If you are concerned about whether or not you’ll be able to afford your lifestyle after retirement, consider your lifestyle now. Reducing unnecessary expenses now has a twofold benefit. It will allow you to shift more of your current income into savings, and it will lessen the impact of later lifestyle transitions, if they turn out to be necessary at all.
Determine your retirement goals. This step is all about figuring out where you want to end up. Retirement goals are as diverse as the people that set them. Figuring out how and where you want to spend your retirement is a key step in smart retirement planning. If you plan to live somewhere where the cost of living is relatively high, you had better make sure you plan accordingly ahead of time. Along with the basics, like; where do you plan to live, how much do you want to travel, and how long of a retirement are you planning for, make sure to consider other factors; what about the costs of insurance and healthcare, taxes that will be deducted from retirement income and the like. This shouldn’t be a daunting task, but it is one that should be done carefully and probably with the benefit of professional advice.
Get professional advice. The fact of the matter is that this is no time to go it alone. Think about it this way, would you rather be independent now while you do your financial planning, or would you rather be financially independent once you retire. Let’s be clear about what this advice means though, do your research, walk into the conversation with a financial planner well informed and ready to interview them. You probably wouldn’t marry the first person you went on a date with, neither should you assume it’s a good idea to place your financial future in the hands of the first person willing to manage your money.
Don’t stop there. Simply finding a financial planner, even one that you are very satisfied with shouldn’t be a final step; it should be a first step. Expect to take a role in the planning process as well as in what comes after you’ve got a plan. How active of a role you take will depend on your comfort level and expertise, and your specific situation. But whether you want to drive the car, or help navigate from the passenger seat, this is your journey. Don’t fall asleep in the back seat of the car and just hope you arrive at your destination.