5 Things Financial Advisors Want You to Know About Planning for Retirement

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While retirement is the ultimate milestone, it can look different to different people. Personal values, outlook, age, generation, and other factors shape what retirement looks like for each person. Nevertheless, regardless of its form, what truly matters is that your retirement aligns with your preferences and provides you with the security and comfort you desire. This is why hiring a financial advisor is essential for retirement planning. 

A financial advisor can assist you in formulating a retirement plan that considers crucial aspects you might overlook. This article will provide some insights into retirement planning that a financial advisor would want you to know. 

Below are five things that financial advisors want you to consider when you are planning for retirement:

1. Move beyond the numbers and create a personalized strategy 

It is easy to become fixated on the numbers. Financial calculations and rules of thumb often take center stage. While these numerical guidelines can offer a valuable target, they should not overshadow the importance of personalization in crafting a retirement strategy that truly aligns with your aspirations and financial circumstances.

For example, one commonly used rule in retirement planning is the 4% rule. This rule suggests that withdrawing 4% of your retirement nest egg annually can help you sustain your lifestyle without exhausting your savings too quickly. While this rule has been used in retirement planning for a long time, it is essential to recognize its limitations. The 4% rule may be considered obsolete and not adequately account for factors such as increasing life expectancy, fluctuating market conditions, or evolving tax policies. Therefore, mindlessly adhering to it may not be the most suitable approach for everyone.

Similarly, the 80% rule and the ‘ten times your income’ guideline offer general benchmarks for retirement savings. The 80% rule advises you to save at least 80% of your pre-retirement annual income to continue with the same standard of living post-retirement. Meanwhile, the ‘ten times your income’ guideline recommends accumulating a retirement nest egg equivalent to ten times your annual income. While these guidelines can provide a rough estimate of how much you may need to save for retirement, they may not fully capture your individual circumstances or goals.

Retirement planning is not a one-size-fits-all approach. Your retirement needs and goals are unique and can be affected by factors such as your desired lifestyle, anticipated expenses, and risk tolerance. This is why it is crucial to move beyond the numbers and create a personalized strategy that reflects your individual situation. Personalization in retirement planning involves assessing your income, lifestyle preferences, and long-term goals. Rather than adhering strictly to these numbers and benchmarks, it is more important to focus on understanding what matters the most to you during retirement, such as traveling or spending quality time with family and friends. Your retirement strategy should be tailored to support all these aspirations while providing financial security and peace of mind. Flexibility is another critical component of personalized retirement planning. Life is unpredictable, and your financial circumstances may change over time. Your retirement strategy should be adaptable to accommodate your shifting priorities and not necessarily be rigid and ruled by mere numbers. 

Working with a financial advisor can enable you to construct a personalized strategy that is beyond numbers and reflects your individual needs, principles, and aspirations. 

2. Create a wholesome retirement plan that focuses on things other than your 401(k)

While you may often wonder what the best retirement fund is to invest in, retirement should go beyond this concern. Proper retirement planning encompasses much more than basic retirement funds like the 401(k). Your retirement funds are undoubtedly necessary, but they are just a piece of the larger puzzle. It is essential to focus on other aspects, such as diversifying your retirement income sources beyond traditional investments for stability and security in your golden years. For example, you can consider alternative retirement investment strategies, such as real estate, to generate a passive income stream. Investing in residential or commercial rental properties or Real Estate Investment Trusts (REITs) can supplement your retirement income and also provide a hedge against market volatility, as real estate is not directly correlated to the stock market. 

Apart from investments, you must also consider other factors that can influence your finances in retirement. For instance, debt management is a crucial aspect of retirement planning that is often overlooked. Carrying debt into retirement can significantly impact your financial security and limit your ability to enjoy your newfound freedom. You must prioritize paying off high-interest debt, such as a mortgage, before retiring to reduce your financial burdens and create a solid foundation for your golden years.

In addition to accumulating wealth, it is essential to have a clear understanding of how you will allocate your retirement income. You can develop a detailed retirement budget that categorizes your anticipated expenses and distinguishes between your essential needs like healthcare and housing and discretionary spending on travel and leisure activities. Creating a comprehensive monthly budget can allow you to make informed choices about saving and investing your money. It ensures that your financial resources are effectively used to support your desired lifestyle in retirement.

Your Social Security benefits are a critical part of your retirement income. These checks can significantly impact your financial well-being. The timing of your retirement and when you choose to draw your Social Security benefits can have a substantial effect on the value of your check. While you are eligible to begin receiving benefits at your Full Retirement Age (FRA), delaying withdrawals until later can result in larger benefit checks. It is important to carefully evaluate your options and consider factors such as life expectancy, retirement age, spousal benefits, and tax considerations when making decisions about withdrawing Social Security. 

Where you choose to live during retirement can also have a considerable impact on your financial situation and overall quality of life. Some locations offer retirement-friendly environments with favorable tax policies, access to amenities like social clubs and recreational facilities, and affordable housing options. Exploring these options can help you stretch your retirement savings further and enhance your life post-retirement.

Crafting a holistic retirement plan requires looking beyond your investment portfolio and addressing multiple factors that reflect your unique goals and priorities in the years to come. Ultimately, taking a holistic approach is essential to ensuring that your retirement years are truly secure.


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3. Prepare for the expected and the unexpected 

It is essential to plan not only for the expected expenses but also for the unexpected challenges life may throw your way. Building a comprehensive retirement plan involves anticipating both types of expenses to ensure you are adequately prepared for whatever comes your way.

Expected expenses in retirement can include your day-to-day needs like groceries, gas, etc., and relatively bigger financial obligations like insurance premiums. Income investments for retirees, such as dividend-paying stocks, bonds, and withdrawals from a 401(k) or an Individual Retirement Account (IRA), can provide a reliable source of cash flow to support these needs. These investments can be used to cover essential expenses like housing costs, utilities, and leisure activities to ensure a steady stream of income throughout your retirement years. However, retirement planning is not just about covering routine expenses. It is also about preparing for significant financial commitments, such as healthcare and long-term care. Healthcare costs can become a substantial portion of your retirement budget as you age. It is crucial to explore insurance plans and dedicated healthcare savings vehicles, such as Health Savings Accounts (HSAs) and health and long-term care insurance, to cover these expenses and ensure you have access to timely and quality healthcare when needed.

In addition to expected expenses, it is essential also to plan for the unexpected financial challenges that may arise during retirement. Unplanned expenses, such as home repairs or unexpected financial assistance for family members, can place a strain on your finances if you are not prepared. It is crucial to create an emergency fund to address these unforeseen circumstances. An emergency fund should provide you with immediate access to money in case of unexpected expenses or emergencies. Your emergency fund should be highly liquid and easily accessible, preferably held in a high-yield bank account or a money market account. These accounts offer financial flexibility and convenience and allow you to access funds quickly when needed. It is important to note that your emergency fund should be reserved solely for emergencies. Dipping into these funds for non-essential expenses can undermine its purpose and leave you financially exposed in the event of a crisis.

Preparing for both the expected and the unexpected in retirement is essential to creating a financial plan that provides stability and peace of mind. Building a diversified portfolio of income investments, dedicated healthcare savings and insurance options, and simultaneously establishing an emergency fund can provide you with the resources needed to navigate all your expenses, no matter what the future may hold.

4. Aim for a happy and fulfilled retirement 

While financial security is a vital component of retirement planning, it is equally essential to prioritize your emotional well-being. True happiness in retirement extends beyond wealth and includes finding purpose in your everyday life. Your emotional well-being directly impacts your quality of life during retirement. When you are content and fulfilled, you are less likely to feel the need to overspend or seek external validation through your possessions. Instead, you are able to appreciate life's simple pleasures and enjoy your golden years.

One key aspect of emotional well-being in retirement is finding a sense of purpose. Retirement is the right time to explore new interests and passions and engage in activities that you enjoy. You can consider starting a new hobby, volunteering for a cause you are passionate about, or mentoring others. Remaining socially engaged is another crucial element of your emotional well-being in retirement. Human connection is fundamental to our well-being, and spending time with friends, family, old colleagues, or neighbors can bring immense joy and fulfillment. Joining community centers, clubs, or social groups allows you to connect with like-minded individuals that can contribute to your overall happiness.

Moreover, staying connected with your family, such as siblings, children, grandchildren, etc., can play a significant role in your emotional well-being during retirement. Spending quality time with loved ones through regular family gatherings or virtual communication can enhance your sense of belonging and strengthen your support network. You can also reconnect with old friends from school, if possible. Exploring new experiences, traveling to new destinations, and learning about different cultures can be other ways to enjoy retirement. These activities force you to step outside your comfort zone and open yourself up to personal growth. You may also consider pursuing your entrepreneurial dreams, if any, such as starting a small business. Additionally, you can consider writing a book in your retirement years based on your personal or professional experiences or other topics. 

Ultimately, achieving emotional well-being in retirement requires a holistic approach that prioritizes your mental, emotional, and social needs. Finding and focusing on things you like can help you be more mentally active, have a sense of purpose, remain socially engaged, stay connected with loved ones, and enjoy new experiences. This way, you get to enjoy a fulfilling and meaningful retirement.

5. Working with a local financial advisor can be more helpful 

Working with a financial advisor is vital to ensure you meet your retirement goals. However, choosing the right financial advisor is crucial, and there are several factors to consider beyond just their expertise and experience. One important consideration is hiring a local financial advisor. While knowledge and expertise are vital, a local advisor can bring additional benefits to the table. They possess a deep understanding of the local tax landscape, which can significantly impact your retirement strategy. State taxes vary widely, and a local advisor can help you navigate these nuances to optimize your tax planning efforts.

Furthermore, a local financial advisor can offer a personalized touch that may be lacking with larger national firms. They have a keen understanding of the unique needs and challenges faced by individuals in your locality, which allows them to tailor their recommendations to your specific circumstances. Additionally, local advisors often have a smaller client base so that they can dedicate more time and attention to each client. This provides you with comprehensive support and guidance throughout the retirement planning process.

Beyond tax planning, a local advisor can also offer assistance on local financial institutions, such as banks and insurance companies. They are likely to know the people working at these institutions and can use their contacts to help you meet your savings and insurance needs effectively. They can also answer your questions about bank accounts and offer assistance with financial products.

Ultimately, retirement planning is a long-term journey, and having a reliable financial advisor guide you through this journey can make all the difference. Choosing a local financial advisor helps you gain access to specialized knowledge, personalized advice, and ongoing financial support tailored to your unique retirement needs and goals. With their timely expertise and guidance, you can plan more effectively.

To conclude

Retirement planning needs to be subjective and cater to your unique personal and financial goals. A great retirement is one where you find solace and comfort and can live in peace with your decisions. However, knowing what is best for you can be tricky. There are many rules and guidelines in place that make it hard to understand what to do. This is why hiring a financial advisor can be crucial. Not only can the financial advisor guide you on what to do, but they can also guide you on what not to do, paving the way for a unique and tailored strategy.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.