Planning for Retirement

The retirement dynamic has changed and continues to evolve. Today’s retirees are living longer and have more active lifestyles than those of previous generations. Regardless of whether you are already saving for retirement or well on your way to meeting your financial goals, planning ahead is key to securing your finances in retirement.

Establish a Plan

How much money will you need in retirement? While there is no set dollar amount that will serve everyone, setting a goal for the amount you want to have saved and the age you want to retire can help you establish a savings plan that can help you live a comfortable life in retirement. Retirement planning involves identifying income sources (Social Security, pensions and retirement plans, and earnings from work), estimating expenses you will have in retirement (housing, healthcare, and discretionary spending), initiating a savings program (opening an IRA or investing in a company sponsored 401(k) plan), and managing assets and risks (diversifying to reduce financial risk and choosing a variety of investments for your savings). Periodic checks to your retirement plan are recommended to ensure addresses and beneficiaries are up- to- date.

Time Horizon

Investment Horizon. Depending on your current age, you may have a short-term or long-term time horizon in which to invest money that can grow and fund your retirement. Typically, the longer your time horizon, the more risk tolerance you can have with your investments. Long-term investment options include growth stocks, stock funds, bond funds, and Roth IRAs. Investments held over longer periods provide more time to experience the peaks and valleys of the natural market. With a short-term time horizon, money may need to be accessed sooner and the focus is on getting your initial investment back while minimizing the risk of losing money. Short-term investment options include money market accounts and short-term certificates of deposit, both of which mature in less than one year.

Spend Horizon. Depending on your health and life expectancy at retirement age, retirement savings should be expected to last 10 to 30 years. The 4% rule assumes you will spend 30 years in retirement and entails withdrawing 4% of your total investments in the first year of retirement. Subsequent yearly withdrawals are at the same 4% rate, adjusted for inflation. The 4% rule is quite rigid and market performance is unpredictable. As such, it is important to monitor and adjust your retirement spending based on your personal circumstances.

Estate Planning

Estate Plans are for everybody, not just the wealthy. The goal of Estate Planning is to leave the most you can to your heirs. Whether you opt to set up an Estate Plan with the help of an attorney in person, or complete the process online, tax considerations are necessary. With an established Estate Plan, you may be able to avoid probate and avoid substantial taxes on assets passed to loved ones. Possible taxes that may affect your Estate Planning include the federal estate tax, which is assessed on assets worth more than $12.92 million for tax year 2023; a state inheritance tax, which is levied and paid by persons who inherit property, and is dependent on tax laws in your state, the size of your estate, and your relationship with the person inheriting your property; and the gift tax, which applies to gifts exceeding $17,000 (individual) or $34,000 (married couples) for tax year 2023.