I hope this blog post finds everyone healthy and doing your best to navigate through this new normal.
I don’t know about you, but I like to find tasks in the evening and on the weekends to keep myself and my family busy. My family doesn’t always appreciate it, but I think it makes the time go faster!
You may already have a long to-do list, but if you don’t or you really don’t want to tackle the items on your current list, I would encourage everyone to add Personal Retirement Planning to the list!
I think it is very important for everyone to develop a personal retirement plan and to review their plan annually. Your plan will give you confidence that you are on the right road to retirement; help your financial advisor give you appropriate recommendations based on your goals and cash flow needs; and during times of uncertainty, your plan is especially important, because you have a solid strategy to refer to and follow!
Your personal retirement plan should detail:
- Your Total Cost of Retirement – This number may be intimidating the first time you see it, but it is the main driver of your plan. When determining your total cost of retirement, you will take into account your monthly retirement living expense, your retirement age, and your life expectancy. Many people have a hard time estimating their monthly retirement living expense. A common rule of thumb is 70%-100% of your annual earned income prior to retirement.
- Your Income Sources – What income sources will you have in retirement (social security, pension, rental income, annuity, etc.) to help offset your retirement costs?
- Your Financial Accounts – How much will you be contributing to your accounts prior to retirement? What are your estimated account balances your first year of retirement? When will you need to withdraw funds in retirement to fund the gap between your retirement income and retirement expenses?
- Your Retirement Picture – Will you be fully funded through retirement? If not, what steps can we take today to help you reach your retirement goal?
You may be thinking at this point… this is a lot of information, I can’t do this on my own, or I don’t’ know where to start! These thoughts are totally normal, and my team and I am here to help you through the process so please don’t stop reading.
The first step of the retirement planning process is the collection of information. During your normal, busy lifestyle, it is often hard to find time to put together the documents needed to build a retirement plan, but we currently have a little extra time on our hands, so I would encourage you to sit down over the next couple weeks of quarantine, and compile the following documents:
- Recent Payroll Stubs
- Workplace Retirement Plan Statements
- Social Security Statements – you can go online www.ssa.gov to pull your most recent statement
- Bank Account Statements
- Investment Account Statements
- Mortgage Statement
- Life Insurance Information
- Pension Plan Statements (PERA, TRA, etc.)
- Total Monthly or Annual Living Expenses
- If Applicable, Business Succession Plans
Here is the good news… Once you have gathered the documents and provided them to your advisor, your heavy lifting is done! Your advisor will begin building your plan, contact you with any questions, and then schedule a meeting to review the first draft of your personal retirement plan.
I would challenge you to use this downtime to write down your retirement goals and bucket list, compile the documents needed to complete your personalized retirement plan, and check items off your to-do list so you are ready to hit the ground running when restrictions are lifted. If you have any questions while you are putting together the information or would like help putting together your personal retirement plan, please don’t hesitate to give me a call (320-243-3100) or send me an email (firstname.lastname@example.org).
Michelle Herickhoff, CFP®
MAG Wealth Management