Goals-Based Budgeting: Your Retirement Roadmap
Just as we advise younger clients about Goals-Based Investing, retirees can benefit immensely from Goals-Based Budgeting. This approach helps you allocate your resources effectively, ensuring you meet your needs while still enjoying life’s pleasures. Here’s how to implement it.
Identify and quantify your “Must Haves,” such as:
- Basic needs – Food, shelter, healthcare
- Lifestyle maintenance – Continuing the life you’re accustomed to
- Insurance – Health, life, and long-term care policies
- Regular bills – Utilities, property taxes, vehicle expenses
Define “Want to Haves” that reflect your personal priorities, such as:
- Travel and leisure activities
- Hobbies and personal interests
- Gifts for family or charitable donations
- Home improvements or relocations
Prioritize and Allocate:
- Ensure all “Must Haves” are covered first
- Distribute remaining funds among “Want to Haves” based on importance to you
- Be prepared to adjust as circumstances change
Estimating Your Retirement Timeline
One of the biggest challenges in retirement planning is accurately estimating how long your savings need to last.
First, consider these factors:
- Life expectancy: The Society of Actuaries reports that 43% of retirees underestimate their life expectancy by at least 5 years.
- Family health history: Longevity often runs in families.
- Personal health and lifestyle: Diet, exercise, and stress management play crucial roles.
Then consider these strategies:
- Plan for a longer retirement than you might expect. It’s better to have a surplus than to run short.
- Delay taking Social Security to increase your benefit amount
- Explore part-time work or consulting to supplement income and stay engaged
The 4% Rule: A Starting Point, Not a Guarantee
This common rule suggests withdrawing 4% of your retirement savings annually, adjusted for inflation. But remember:
- It assumes historical market returns, which may not hold true today
- It’s based on a 50/50 stock/bond portfolio, which may not suit everyone
- It doesn’t account for individual longevity needs
7 Key Takeaways for Retirement Success
We’ve shared a lot of information so far, but if you keep these essential principles in mind, you’ll be well on your way to retirement peace of mind:
- Personalize it: Distinguish between your unique needs and wants, and prioritize accordingly
- Plan for longevity: Expect to live longer than you might think and prepare accordingly
- Monitor continuously and stay adaptable: Be ready to adjust your strategy as economic conditions and personal circumstances change
- Leverage market conditions: Take advantage of interest rates for savings while being mindful of borrowing costs
- Consider the tax implications: Strategic withdrawals from different account types can optimize your tax situation
- Factor in required minimum distributions (RMDs): Plan for these mandatory withdrawals from certain retirement accounts
- Seek guidance: Work with a financial advisor to tailor your approach and navigate complex decisions
Remember, retirement planning doesn’t end when you stop working; it’s an ongoing process. Whether you’re just starting to think about retirement or you’re already there, our team can provide personalized guidance to help you make the most of your hard-earned savings and turn your dreams into reality.
Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen, or experience. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. Nothing in this communication is intended to be or should be construed as individualized investment advice. All content is of a general nature and solely for educational, informational, and illustrative purposes.
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