When I first started creating financial plans at Rowling & Associates, I initially thought these questions about retirement had simple yes or no answers.
However, I soon learned that when it comes to retirement, the situation is rarely as dire as it seems on paper. After having created dozens of financial plans to date, I can now confirm that there’s always a solution for your specific need.
Let’s take a look at an example.
Say you would like to retire at age 50. Here are some of the questions we will consider as we work to create a plan that allows you to meet your retirement goal.
How much do you currently have saved for when you retire?
Saving money is a big part of planning for retirement. Here at R&A, we recommend that people save at least fifteen percent of their total income in order to be on track for a normal retirement age of 67. For someone retiring earlier, such as at age 50, that amount will obviously be higher. As part of the financial planning process, we would look at how much you have saved currently and how much more you would need in order to meet your goal and live comfortably.
How much more can you save until you reach age 50?
Once we know how much is needed for you to meet your retirement goal, we will look at ways to increase your savings. We will look at your investments and may recommend different funds for your portfolio, or a change to your portfolio’s allocation to give you a greater return.
We will also look at your employee benefits, such as your 401(k), to see if you are contributing enough to get an employer match if one is available. Depending on how much more money is needed for you to retire comfortably, we may also recommend a higher contribution to this retirement account.
If you were uncomfortable with a high risk portfolio, we may have to consider other ways to ensure you have the savings necessary to retire at the age you wish to. This could include finding a way to increase earnings, such as changing jobs or opening a side business.
Is there flexibility with your financial goals, such as when you would like to retire?
The purpose of a financial plan is to create a roadmap you can follow to meet all of your financial goals. That said, sometimes these goals can’t be met quite in the manner or time frame you envision. This is something a financial planner can help you figure out.
For example, if you wanted to retire at age 50, but were not on track to meet this goal with your current savings, a financial planner might recommend a higher risk portfolio allocation in order to obtain a higher return. They might also recommend saving more income, or even finding ways to increase your current income to give you the ability to set more aside.
Let’s say that for whatever reason, none of these solutions are feasible for you. Perhaps you are uncomfortable with the idea of assuming greater risk with your investments. Maybe you are happy at your job and don’t want to work more than you already do. If this is the case, then it’s time to evaluate your financial goals.
If you are unable to save enough for retirement at age 50 due to other expensive goals such as travel or extensive home renovations, you may need to consider postponing one or more of these goals. One of the benefits of working with a financial planner is that they can talk through your goals with you and help you decide when, where, and how you can best meet them.
These are just some of the questions that we can help answer.
In the grand scheme of things, I can honestly say I have never seen or created a financial plan where we could not find a solution. Maybe we needed to tap into home equity as a reverse mortgage or simply face reality and let you know that you cannot afford the Rolls Royce you always wanted and still meet the rest of your long-term goals. Whatever the case may be, we can definitely help you find answers to your questions. We can even help answer those questions you never thought of asking.
Once a plan is created for you, we can fine tune it each year to help reinforce the most important factor in all of this – that you will be OK. Please reach out to anyone on our financial planning team if you’d like to discuss your current plan or if you’d like us to create a new one for you.