If you’re five to 10 years away from retirement, you’re probably asking yourself, “Will I be financially ready when the time comes?” Answering these four questions can help you figure that out.
1. How Do I Want to Spend My Retirement?
If you haven’t already done so, now is the time to start figuring out what you want your retirement to look like. You may want to keep working part time, start a business or spend the next five years sailing around the Caribbean. Once you know where you want to go, you can put a plan in place and begin firming up the necessary finances. If you want to start your own business, for example, you’ll need to figure out how much seed money the new enterprise will require and how that will affect your retirement budget, factoring in the effects of a changed tax picture. Even a plan to kick back at home has financial implications, particularly if you have philanthropic goals or want to pass wealth along to your heirs.
2. Do I Have a Retirement Plan In Place?
As your retirement date grows nearer, you’ll have to put a plan in place to help you translate your savings into an income stream that allows you to achieve your retirement goals. To help cover your essential expenses, hold investments that generate steady, reliable income, such as a ladder of high-quality bonds, or an annuity. Another option to consider is delaying when you claim Social Security. Someone who begins collecting at age 70 will receive monthly checks for life that are 76 percent higher than one who starts collecting at 62. To pay for discretionary spending, build a diversified portfolio that provides long-term growth, to help you keep pace with inflation.
3. Will I Outlive My Assets?
With life expectancy increasing and health care costs skyrocketing, Americans approaching retirement are concerned about draining their nest eggs. However, according to the Merrill Lynch Affluent Insights Survey, a vast majority of affluent Americans that believe today’s uncertain economic reality is the new “normal”, also believe they’re better prepared to cope with economic uncertainty. Despite this ongoing uncertainty, more than half of all respondents (58 percent) feel a greater sense of stability in their financial lives today than they did one year ago. Concerns about the economy remain, however, with 54 percent worried about the impact of the economy on their ability to meet their financial goals, and 50 percent concerned about the lingering unemployment rate (50 percent). As for what they can control, within affluent families one-third (33 percent) of couples have felt in control of their financial lives during the last year, while half (50 percent) have taken steps to gain greater control, including more vigilantly sticking to a budget (32 percent), making more joint investment decisions (29 percent) and setting tangible goals for their future (28 percent). Similarly, 33 percent of respondents said they are living more within their means.
4. Are My Spouse/Partner and I on the Same Page?
If you’ve worked for 40 years, you may want to take time to play golf and relax at home, whereas your spouse or partner could be planning to continue working. The key is to open a dialogue early and have frank discussions about how each of you wants to spend your later years and how you plan to finance your activities. Getting together on these important decisions now will definitely make you both happier in the long run.
For more information, contact:
Michael S. Koppenhaver
Senior Financial Advisor, Senior Vice President – Wealth Management
Koppenhaver, Hawkins & Associates
Merrill Lynch Wealth Management
55 Kings Highway
Dover, Del., 19901
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