Retirement Planning

What is Retirement Planning?

In broad terms, retirement planning is the saving and allocation of finances for the purpose of retirement and financial independence. Although the underlying principle of retirement—save and invest early—is rather simple, the mechanics of retirement planning can be complicated. This is because the shape of retirement has significantly changed over the years and individuals are now living longer. Combine these factors with concerns like employer-sponsored retirement plans and social security maximization strategies and a retirement plan becomes a portfolio with many considerations. Likewise, retirement planning is a living process, subject to periodic evaluation, especially if you include growth products like annuities and life insurance policies in the mix.

While retirement planning may be considered a specialized area of personal finance planning, when you think about it’s really the end goal. Upon retirement you no longer have income earned from work and are now relying on your assets to sustain you and your ideal quality of living through the remainder of your life. This is why it is important to undertake a retirement plan, to establish priorities, and likely work with a retirement planning advisor that can help you maximize your portfolio.

Ideally you should begin the retirement planning process as early as possible. If you have stable income and a need to protect assets, you should consider retirement planning. Because every individual will have a unique situation and their own picture of retirement, the specific solutions involved in your retirement plan will vary. The first step in crafting a retirement plan is assessing your available instruments and your readiness-to-retire based on your desire lifestyle. Many retirement planning advisors will suggest taking advantage of employer-sponsored programs like 401(k)s first, especially if the employer offers matching contributions.  Then you may want to consider cash accumulation policies like deferred annuities or permanent life insurance. Although the latter is primarily designed for death benefits, these types of life insurance policies may offer accumulation value that can be accessed during your life.

The key to a successful retirement plan is regular attention and evaluation. Retirement planning is not a one-time activity, but rather a process that grows and adapts with your unique situation as you live and work.  A common saying regarding retirement planning is that you don’t get much of a do-over. This is true and explains why starting as early as possible is critical to help ensure a robust retirement portfolio.  Retirement planning advisors can help position you to enjoy a more worry-free retirement.