Everyone has specific expectations and dreams about retirement, but will your current plan meet your ultimate objectives? Today, more than ever, planning for retirement is a necessity. Preparation and follow-through can help you avoid shortfalls in meeting your income needs and help assure you of a smooth, secure transition from the world of work to the world of retirement.
Keeping Pace with Change
Planning ahead means setting goals and deciding how they will be met within the framework of a changing financial picture. Without proper planning, many retirees may be forced to manage with a lowered standard of living due to a lack of assets. In the absence of a solid financial foundation, you may be faced with some hard choices over the course of your retirement years. A successful financial strategy, carried out faithfully, has the potential to manage economic hardships.
As retirement approaches, there are some key points you should take into consideration in order to best position yourself for an enjoyable retirement:
- Stabilize Your Asset Base. Certainly, younger individuals may be able to afford taking greater risk with more aggressive strategies. As you approach retirement, it may be prudent to gradually shift your retirement assets to more conservative income-producing vehicles. An asset allocation strategy may be especially challenging for those who begin retirement planning later in life. In such situations, it is particularly important that your vehicles not exceed or under-exceed your personal risk tolerance.
- Increased Longevity Means Longer Retirement. The culture of retirement is changing. With Americans’ increased longevity, it’s not uncommon for retirement to last 20 years or more. Therefore, your retirement assets will need to generate income streams for that length of time, as well as withstand the potential eroding effects of inflation and market volatility.
- Your Retirement—First Class or Economy Class? Some individuals are under the impression that they will be able to live the same type of lifestyle they enjoyed during their working years, and some will. However, it’s important to keep things in perspective. Retirement planning may enable you to avoid having to downscale living arrangements or trim expenditures in order to ensure your retirement assets will be sufficient.
Regardless of how close you are to retirement, it is important to plan ahead to reach your goals. Factors such as how much you have already accumulated, or how far you are from your financial objectives, should play a key role in determining your course of action.