As a Certified Financial Planner (CFP), I have worked with many individuals who begin to get serious about retirement about five years before they think they want to retire. Over the years, I’ve asked retirees what brought them to the decision and what was most important to them. Here’s a condensed version of their collective wisdom.
Have a Road Map
Make sure you have a vision of what you want retirement to look like. For many, it involves travel. For others, it’s spending time with friends and family, and for still others it could be philanthropy. As with any road trip, obstacles can appear along the way, and you have to be prepared to take a detour.
Have a Plan
Just like with a road trip, you have to plan ahead. The first step to take is gathering all of your information. Determine what is most important to you and what you want retirement to look like. Where will you live? What activities do you find enjoyable? What gives your life meaning?
Next, it’s time to take a hard look at the numbers. I have found that most people do not have a true budget and do not realize how much they are spending. This is normal. Now is the time to make the numbers real and see where every dollar comes in and goes out. Habits are hard to break. You’ll be spending your savings during retirement, which can be a difficult transition.
Where will your income come from, and how will you know if your money will last? This is where a financial planner can help. A professional planner can use sophisticated tools to help determine your probability of success. You may also want to consult with a professional to ensure you’re not paying more than your fair share in taxes.
Now that the new SECURE Act is in place, consider the next generation when filling your taxable, tax-deferred and tax-free buckets of savings. The Act requires most beneficiaries to make a full distribution of inherited qualified assets over a 10-year period instead of over their lifetime.
Update Your Plan Annually
It’s important to be flexible and update your financial plan regularly. You may find your goal of visiting the grandkids may not be what your children had in mind for your retirement. You may discover that your health will not allow you to take that vacation to the mountains. Be prepared to make changes to your retirement road map during this journey.
Many people spend more time planning an annual vacation than their retirement. Give your retirement planning some focus this year—and you may find you are ready to retire sooner than you think. Happy trails on your road trip to retirement! PM
Daryl Dagit is the manager and financial advisor in the Peoria office of Savant Capital Management. He can be reached at (309) 693-0300.
This is intended for informational purposes only and should not be construed as personalized financial or investment advice. Please consult your financial and investment professional(s) regarding your unique situation. Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP® and Certified Financial Planner™ in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.