Important Considerations On Retirement Planning
One of the primary reasons that people engage a financial planner is to know if, and when, they can retire. Just the thought of retirement can cause anxiety and many feel overwhelmed and unprepared.
In fact, one of the biggest dilemmas for those approaching retirement is balancing the life they want to live today with the life they want to live in retirement.
There are some common, yet avoidable mistakes that prevent many people from retiring ‘on time’. But with some planning, you can steer clear of the mistakes that could derail your retirement.
Planning for your retirement can seem overwhelming. As a leading financial planner in Melbourne, ICGFP is here to answer any questions you might have.
One Important Question
The first question I ask clients when discussing their retirement plan is, ‘how much income do you need to maintain your current lifestyle in retirement?’
Not surprisingly, for the vast majority the answer is, “I don’t know,” or they’ve made an inaccurate assumption. If the assumption is too high, the goal of retirement may seem absolutely unattainable, and the entire planning process is discouraging. If the assumption is too low, which is most often the case, the retiree could run into a difficult financial situation later in life and have to make drastic, unwanted changes.
The general rule of thumb is to figure that you will need approximately 80% of your current annual income in retirement.
The Need to Consider Health Costs
One of the most overlooked areas of retirement planning observed by financial planners in Melbourne is estimating what health care costs could be in retirement, and including this in the calculation of income needs.
Fidelity estimated that a 65-year-old married couple that retired in 2012 will incur an average of $240,000 in healthcare costs alone in retirement. By overlooking this large potential outlay, retirees could feel strapped for cash in their most vulnerable years.
Making Investments
When investing for your retirement, time and risk are closely related. If your retirement is further away, you may want to consider higher risk investments that are more likely to yield a higher rate of return. But if you are nearing retirement, you’ll likely want something more conservative to protect your hard-earned retirement savings. You want your money to grow faster than inflation, so it goes farther.