By Shirley Ikehara – The Retirement Check-In® study found that on average, Americans nearing retirement report a gap of nearly $200,000 between what they have saved, and what they believe they will actually need to live comfortably in retirement. According to the same survey, many Americans also lack confidence about being able to cover the necessary expenses in retirement such as housing, food and taxes.
Planning for retirement can be complicated, but breaking it down into simple steps, as demonstrated in the new Confident Retirement® approach can be a simple way for those nearing – or in – retirement to begin planning. The approach takes into account four fundamental areas:
Covering essentials. This is the foundation of any retirement strategy and includes ongoing necessities such as food, housing, taxes and medical expenses. Because economic conditions may always be a little uncertain, your goal should be to fund essential expenses with sources of guaranteed or stable income. This may include social security or a defined benefit plan, among other options.
Ensuring your lifestyle. Most people who are planning for retirement have additional goals they want to pursue—travelling, hobbies, and relocation are just a few. Consider working with a financial professional to develop a sustainable strategy that will cover the expenses that come with your lifestyle goals.
Preparing for the unexpected. Unanticipated events can have a devastating impact on your retirement plans. Since they’re no longer earning a salary, retirees typically lack the financial flexibility to make up for consequences to their retirement plan from unexpected events. Personal liability, medical expenses, supporting a family member and loss of a spouse are some of the most common unanticipated events. Developing a game plan to navigate these bumps in the road that may occur during your retirement is important.
Leaving a legacy. After accounting for essential, life, and unexpected expenses, it’s time to create a legacy plan for any of your remaining assets. Having a plan in place for your loved ones and the causes that are important to you is an essential part of planning for the future. To be effective in your legacy plans, aim to maintain control and leverage as you age. The potential for some types of impairment increases during retirement, so in order to help ensure that your assets are used according to your wishes, consider having these three documents prepared: a healthcare directive, living will, and limited financial power of attorney. Also make sure your beneficiary designations are up to date and that you’ve begin putting an estate plan in place.
The Confident Retirement approach developed by Ameriprise Financial uses the four principles outlined above as a framework to help advisors and their clients work towards their retirement goals. It’s never too early – or too late – to start preparing for retirement. Consider working with a financial professional to define and work toward your unique retirement goals.
Shirley Ikehara, CFP®, CFS®, CRPC®, is a Financial Advisor (and CERTIFIED FINANCIAL PLANNER practitioner™) with the practice of Shirley Ikehara & Associates at Ameriprise Financial Services, Inc. in Honolulu, Hawaii. She specializes in fee-based financial planning and asset management strategies and has been in practice for 17 years.
The key to saving for retirement is to start early and be consistent. Save with every paycheck and take advantage of any employer matching plan. Unfortunately most in their 20s and even 30s and 40s don't think about retirement. On a related note the site retirementandgoodlivng offers some good information about finance, health, retirement locations, etc. Worth checking out.
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Excellent article. This is often something we don't plan for until it's too late. Especially when it comes to planning for the unexpected. A great book I recommend on this is by Usiere Uko called, Practical Steps to Financial Freedom and Independence: Your Road Map to Exiting the Rat Race and Living Your Dreams. His book is more about life than money and what I love is that the author shares his personal experiences to help you achieve your financial goals. You can find his website here: http://www.financialfreedominspiration.com
I hope at the end of my career I will have at least half of this to show for it. Congratulations!
Enjoy your retirement! It's all about you now.You can do all the things you always wanted but never had the time for.
The potential for some types of impairment increases during retirement, so in order to help ensure that your assets are used according to your wishes, consider having these three documents prepared: a healthcare directive, living will, and limited financial power of attorney.
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