Finding your way into the end zone of retirement can seem daunting. Your end goal is a touchdown, but sometimes you feel like settling for a field goal.
Yes, we’re excited for football season. Why do you ask?
Teams don’t just land in the end zone. They work their way there, by yards and inches. Setting small goals within your retirement plan will help you gain yardage. Here are some markers that will help you score a retirement touchdown.
Decide What a Touchdown is for You
People generally know they want to retire comfortably. They definitely know they don’t want to run out of money. But what does that mean for you? Do you want to travel? Provide college education for kids and grandkids? Buy a tiny house in the mountains?
Knowing what you want out of retirement will help you assess the risks associated with investments, diversify appropriately and, mostly importantly, set aside enough money.
Take What the Defense Gives You
Life circumstances will dictate much of your retirement plan. While it’s tempting to hold to a rigid investment philosophy, it’s important to be flexible and embrace the opportunities as they come.
If your company offer a generous 401(k) match, take full advantage of it. If you are in good health, consider a tax-advantaged health savings account (HSA). Did you come upon a financial windfall? Make sure it is optimized for taxes and set aside in the appropriate investments. When you reach Social Security age, determine the best time to start withdrawing to maximize your distribution over your lifetime.
Vary Up Your Offensive Game
You don’t want a fumble on the one yard line. Proper asset diversification will help you avert catastrophe by making sure all your eggs aren’t in the same basket.
It’s also important to consider your future tax burden. Being overinvested in tax-deferred accounts (such as 401(k)s, IRAs etc…) can set you up for a huge tax bill down the road. Further, you might need some investments that are accessible in the short term for moving expenses, illness, or maybe your children moving back home.
Move the Chains
The point of investing money is to have money, and to have money you have to make money. It is important to regularly check up on your investments to make sure they are giving you the rate of return on your investment that your retirement will require.
Did you see a 4 percent return on your investments? Against 3 percent inflation, that might not seem too shabby. But in a bull market where 6-7 percent has been commonplace? It might be time to re-evaluate.
Convert in the Red Zone
If you are nearing retirement, it’s time to think about how your money is going to be distributed. Examine the impact required minimum distributions will have on your tax situation. Once you are in the retirement phase, make sure your money works for you. Regularly re-visit your estate plan to make sure you have the right beneficiaries and that your assets are going where you want them to go.
Get a Seasoned Coach
Your retirement playbook is going to be long and complicated. Work with someone who can help you navigate the field conditions in light of what you want out of retirement.
The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
This article originally appeared in the Pioneer Press on September 7, 2019. You may view the article here.
Bruce Helmer, a founding member of Wealth Enhancement Group, has been the host of the “Your Money” Radio Show for more than 20 years. He is also featured weekly on the Twin Cities CBS affiliate WCCO, and has penned three financial advice publications.