Financial Planning for retirement

retiredThere are 3 crucial time periods to do financial planning for retirement.

Financial planning for retirement is all about being proactive. Believe me when I say that nobody is as interested in your income in your retirement years as you are.

Financial planning for retirement is all about being proactive in three key periods of time. The first period is right now, this month. The second is the five years immediately before your retirement date. The third key period is the one from your retirement age to your expected date of death.

Now death may not be something you wish to think about but you cannot do remotely accurate financial planning for retirement without a realistic estimate of how many months you will live in retirement. For example if you expect to live until age 80 you need to plan for 20 X 12 months of X dollars of income.

Right now, this month, you need to gather all available data and estimates of income and expenses for each month in your retirement. A good place to start is with your bank statement. Calculate how your bank statement will look for the month you retire. Go through each item and ask yourself if you’ll get this money or be spending that money when 60.

If you have a Roth or 401(k) (employer sponsored) individual retirement account request an income projection statement from the fund manager. This will enable you to fill in the major income part of your ‘retirement bank statement’. If you are not saving money at the present time for your retirement income then you need to start. Find a financial planning company website with a retirement income calculator. This will guide on how much you need to be saving at each age, in order to have your specified retirement income.

It is your judgment whether you have enough savings to achieve your target income for your full retirement period. If not you should consider buying an annuity or increasing your investments or both.

When it comes to the last 5 years of your work life you need to be proactive about consolidating and protecting your savings. Two things to think about are, what stage of the business cycle is the economy in? (The best time to liquidate assets is at or near the Dow-Jones peak valuations). At what time should you convert riskier investments such as stocks to safer, probably lower-earning certificates of deposit and or bonds?

By all means take the advice of a certified financial planner at all stages of your financial planning for retirement but always remember that it is up to you to make it happen with decisions at the crucial times.

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