Make time now for a retirement reality check

Kim Last

Kim Last

Decades ago, there was a popular book titled “What They Don’t Teach You at Harvard Business School.” Perhaps someday, another book will appear to detail certain aspects of the retirement experience that go unrecognized — the “fine print,” if you will.

Here are some things that can be frequently overlooked:

How will you save in retirement? More and more baby boomers are retiring with the hope they can become centenarians. That could prove true thanks to health care advances and generally healthier lifestyles. We all save for retirement. But with our increasing longevity, we also also need to save during retirement for the decades ahead. That means more than budgeting — it means investing with growth and tax efficiency in mind year after year.

Could your cash flow be more important than your savings? While the No. 1 retirement fear is someday running out of money, your income stream actually could prove more important than your retirement nest egg. How great will the income stream be from your accumulated wealth? 

There’s a longstanding belief that retirees should withdraw about 4 percent of their savings annually. This “4 percent rule” became popular back in the 1990s thanks to an influential article written by a financial advisor named Bill Bengen in the Journal of Financial Planning. While the “4 percent rule” has its followers, the respected economist William Sharpe (one of the minds behind modern portfolio theory) dismissed it as simplistic and an open door to retirement income shortfalls in a widely cited 2009 essay in the Journal of Investment Management.

Volatility has become pronounced in today’s financial markets. The relative calm we knew prior to the last recession could take years to return. Because of this volatility, it’s hard to imagine sticking to a hard-and-fast withdrawal rate in retirement. Your annual withdrawal percentage could need to vary due to life and market factors.

What will you begin doing in retirement? In the classic retirement dream, every day feels like Saturday. Your reward for decades of work is freedom. But will all that freedom leave you bored?

Impossible, you say? It happens. Some people retire with only a vague idea of what’s next. After a few months or years, they find themselves in the doldrums. Shouldn’t they be doing something with all that time on their hands?

A goal-oriented retirement has its virtues. Purpose leads to objectives, objectives lead to plans and plans can impart some structure and order to your days and weeks that can help cure retirement listlessness.

Will your spouse want to live the way you live? Many couples retire with shared goals, but soon discover their ambitions and day-to-day routines differ. Over time, this dissonance could become aggravating. A conversation or two could help you iron out potential conflicts. While your spouse’s “picture” of retirement will not simply be a mental photocopy of your own, the variance in retirement visions might surprise you. 

When should you (and your spouse) claim Social Security benefits? As soon as possible might not be the best answer. An analysis could be required. Talk with a financial professional you trust and run the numbers. If you can wait and apply for Social Security strategically, you might realize as much as hundreds of thousands of dollars more in benefits over your lifetimes.

This material was prepared by MarketingLibrary.Net and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note — investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such.

All indices are unmanaged and are not illustrative of any particular investment.

About
Website:
Kim Last is president of Kimberly A. Last Financial Services in Grand Junction. Working in the financial services industry since 1998, Last holds the CFP, CLU and CLTC designations. Her clients include individuals and small businesses. She focuses primarily on retirement planning, including accumulation, tax strategies, distribution, long-term care and wealth transfer planning. Securities and investment advisory services are offered through Brokers International Financial Services, LLC, Panora, IA, Member FINRA/SIPC. Brokers International Financial Services, LLC, and Kimberly A. Last Financial Services are not affiliated companies. These are the views of Peter Montoya Inc., not the named representative, and shouldn’t be construed as investment or tax advice. Neither the named representative nor broker/dealer offer tax or legal advice. Please consult your financial advisor for more information.
Read More Articles by

Short URL: http://thebusinesstimes.com/?p=9949

Posted by on Oct 23 2012. Filed under Contributors. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

Post Your Thoughts Below

Comments are closed

Sponsor

The Business Times Newspaper . 609 North Avenue Suite #2 . Grand Junction, CO 81501 . 970-424-5133
Log in