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Retirement Planning

Millions of baby boomers are rapidly approaching their retirement years. These investors and future generations face financial challenges that need to be addressed to help preserve their assets, grow their wealth, and ensure their standard of living in retirement.

Social Security benefits may be insufficient. Many believe the government will provide an adequate amount of money to help them enjoy a comfortable retirement. However, Social Security provides only about one-third of the amount needed to maintain an individual’s standard of living in retirement.

We must consider that, despite the government’s best efforts to secure Social Security benefits for every working American, the system's future remains uncertain. One reason is the large number of baby boomers who will become eligible for benefits when they reach retirement age.

Company retirement plans offer few guarantees, if any. Attractive corporate pension plans are becoming increasingly scarce in today's competitive economic environment. What's more, many of these plans do not provide the guarantees offered by plans in generations past.

Lump sum distributions may generate less income than expected. Many investors expect to receive a hefty lump sum distribution from their employer's retirement plan. However, the amount may not be enough to deliver a high steady flow of income to meet anticipated costs in retirement.

For example, a lump sum distribution of $300,000 that earns seven percent would only generate $21,000 in annual income. A distribution of $300,000 that produces six percent would deliver just $18,000 in yearly income. And these figures don't take into account federal income taxes.

Retirees have to protect their assets from the impact of inflation. Some individuals believe their investment portfolios can earn a little less than inflation and still enjoy a comfortable retirement. However, assets that don’t keep pace with inflation can lose their purchasing power, affecting one’s standard of living.

Retirees may need to care for aging parents. Most health insurance plans don't cover the cost of nursing home care, and the average cost of a nursing home stay today is more than $50,000 a year in many regions around the country.

Here are some steps you can take to help ensure your financial future: 

  • Revisit or create your personal financial plan. Identify what you want to achieve financially and in life. The more specific you are, the better your chances of achieving your goals.  Build into your plan ranges for your goals and determine which goals are the most important to you.

  • Understand how much investment risk you need to take in order to reach your stated goals.  To maintain your standard of living in the years ahead, remain invested in securities that can deliver the types of returns that will help your money grow enough to achieve your objectives. 

  • Remember that future returns of the markets are uncertain and therefore your overall plan needs to measure this uncertainty.  Constantly monitor your plan to determine whether or not you are on track toward your goals.  Regularly check to see if you are saving enough, planning on spending too much, or possibly taking on too much investment risk than is needed.

  • Be mindful of taxes. Tax laws continue to change, making certain financial products more valuable to you than before. Strategies employed long ago may no longer be the most beneficial for your specific needs.

  • Remain diversified. Investing too much money in one type of security can subject your portfolio to an inordinate amount of risk, which can be hazardous to your financial health.

Prudent portfolio management is a cornerstone of every successful long-term plan. Your Financial Advisor will be happy to review your plan and propose planning strategies that best reflect your current financial situation in relation to your life goals.