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Retirement Planning

Retirement Planning is the allocation of financial resources for retirement. This process refers to the setting aside of investable assets, so that you may work towards a steady stream of income in the future. The goal of retirement planning is to pursue financial independence, so that the need to be gainfully employed is optional, rather than a necessity.

It is not about how much money you earn right now, it is about how much your savings will earn you in the future.

The process of retirement planning aims to*:

  • Assess readiness-to-retire given a desired retirement age and lifestyle, i.e. whether one has enough money to retire; and
  • Identify actions to improve readiness-to-retire.
  • Acquire financial planning knowledge.
  • Encourage saving practices.

What stage of your life are you in?

Many Years Away--When you are in your 20's, 30's and 40's, your object is to get on with your career, family, debt and expenses. It's a challenging time to also save for your retirement. However, it is imperative that you save as much as possible. One rule of thumb is, that if you plan on retiring at 65, you should begin saving in your 20's, at approximately 15% of your gross income.

Nearing Retirement--When you are in your 50's and early 60's, you have other obligations- a mortgage, your children's college loans and the ups and downs of your investable assets. In your 50's, you need to assess at what age you would like to retire, versus, what is financially practical. Do the math, using a minimum of 80% of your current income, as your need in retirement. Additionally, inflation of approximately 3.0% per year and taxes, are expected to decrease a portion of your income and assets.

In Retirement-- You have hopefully planned for this moment, knowing that you my live another 25-30 years. It is absolutely imperative that you have thoroughly examined the actual start time you have planned to retire and what your financial, medical and discretionary goals are expected to be during this extended period. If you retire in a prolonged down turn in the investment markets, you could significantly reduce the longevity of your investments, and run out of cash flow. Recently, the old rule of thumb of removing 4%, adjusted for inflation, from your investable assets, has been questioned, due to the extended market downturn. It is now being reevaluated and being recommended by some, to take as little as 3%** from your investments, to prolong its longevity.

**The Wall Street Journal, "Say Goodbye to the 4% Rule", March 3, 2013

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.