The key to retirement planning is to start early in your career

Published in the Sept. 18 issue of Morgan Hill Life:

By Dan Newquist

Dan Newquist

Dan Newquist

You’ve worked hard in your career, likely raised a family along the way, and hopefully savored some of life’s finer and sweeter moments. You’ve made it to retirement; you’ve planned, you’ve saved and you’ve set the date … Congratulations!

Now what? Will the funds set aside in your retirement accounts such as IRAs, 401(k)s, other savings plans, as well as taxable accounts provide an ongoing income stream adequate to sustain you throughout your retirement years?

Ideally, the answer is yes and you know this because you consulted with your financial advisor prior to officially retiring. Your advisor is there to help you target your retirement date, construct a savings and investment strategy for retirement and taxable accounts, and establish a sustainable withdrawal rate for retirement income to support the lifestyle you can afford.

The key to retirement income planning is to start early. In my practice, I have this discussion early on with my clients who are young professionals or young families in the wealth accumulation phase to set a baseline goal and we revisit it annually. For clients closer to retirement or in retirement, this is a leading topic every time we meet.
So what is retirement income planning? It is the process of understanding how much income you’ll need during your retirement years to support the retirement lifestyle you want, and positioning your assets to provide that income. While there is no one-size-fits-all plan, there are steps you can take to maximize the possibility of a financially secure retirement.

Some of the key steps include:

• Plan in advance when your retirement will start. Including the impact of early retirement, delayed retirement, and working in retirement, how long it will last and the retirement lifestyle you want and can afford.
• Estimating the amount of money you will need to meet your goals for your retirement lifestyle factoring in healthcare costs, including, Medicare, taxes and inflation.
• Strategizing how to supplement fixed income sources such as Social Security and employer pensions with your retirement savings, like IRAs, 401(k)s, 403(b), and 457, including investment strategies, sustainable withdrawal rates and the best order to tap various accounts.

And even with all the pre-planning, retirees face a number of risks to their income. Sound retirement income planning involves understanding these risks and how they can influence your available income in retirement. Some of these risks include investment or market risk, reinvestment risk, interest rate risk, inflation risk, long-term care and catastrophic medical care risk and taxes.

While many of these risks can affect your income and savings during your working years, the impact may not be as noticeable because you are not depending on your savings for income. In retirement, it is a whole different story.

Join us for a more in-depth look at retirement income planning at our free workshop from 5:30 to 7 p.m. Tuesday Sept. 24 at the Morgan Hill Community and Cultural Center. All attendees will receive a workbook and planner. Register online at www.RNPadvisory.com or call us at 408-779-0699.

This report is intended for educational purposes only. It is not intended as investment advice. Consult your financial or tax-planning professional for guidance for your specific situation.

DAN NEWQUIST, CFP®, AIF® is a Principal Investment Advisor Representative with RNP Advisory Services, Inc., in Morgan Hill and can be reached at 408-779-0699 or [email protected]. Investment advisory services offered through RNP Advisory Services, Inc. – a registered investment advisor. Securities offered through Foothill Securities, Inc., member FINRA/SIPC, an unaffiliated company.