As a chartered retirement planning counselor, the question we are most often asked is, "Will I outlive my money?" Every day we work with clients and counsel them on this exact question. Ultimately, we want to offer the best advice so that our clients can make the choices that best fit their current circumstances and prepare for their future. During the last market correction that began in 2007, our clients did not experience losses, and at the same time they have continued to experience fair rates of return. With that, I'm going to provide a preview of the upcoming seminar.
The top five most often missed retirement planning strategies to be considered are:
Mistake #1: Not Properly Accounting for Inflation.
When planning your retirement, don't use your retirement date as the end point for your planning. You may live another 20-30 years depending on your retirement age. Inflation occurs at an average rate of 3.75 percent per year and is a vital factor to consider while in the planning stage of retirement. It has been stated that on average, inflation will double every 19 years, so this can be devastating to a retirement plan.
Mistake #2: No Clear Retirement Income Plan.
The first step to building a sequential income plan is to consult with your financial advisor that will provide you with a detailed look at your retirement. This includes guaranteed income sources, tax advantage strategies, plans for inflation and risk exposure. Then ask yourself the following questions:
* Will my retirement savings last as long as I (and spouse if married) need it to?
* Is my retirement bulletproof against market downturns?
* Will I have sufficient savings for things such as travel, home repairs, and increased medical expenses?
Not only do you need to satisfy these questions, but you should also have an understanding of how each of your accounts works in the overall plan.
Mistake #3: Too Much Portfolio Risk.
A risk exposure evaluation sheds light on the three important financial phases of life:
* Youth Accumulation
* Adult Preservation
* Maturity Distribution
Your risk tolerance with your investments should follow the same lifecycle take more risk when you are younger as you have more time to grow your retirement; as you age, take less risk to stabilize the growth; and once you retire, ideally you should be at a point when you no longer have to take any risk at all.
At Cornerstone Retirement, our three-step review process determines the current income level and capability, the future income needs and capability from proceeds and strategies to reduce investment fees. This will help determine whether or not your risk exposure is in line with risk comfort level. Often times as the market goes down, people end up losing more money than they thought they would.
A well-diversified retirement portfolio shows money in all three stages of life. In June 2011, the Putnam Institute released a study stating that the maximum percentage a retiree should have invested in the stock market is 25 percent. "For retirement portfolios whose primary goal is to minimize the risk of depletion and sustain withdrawals, optimal equity allocations range between five percent and 25 percent," the institute says.
Mistake #4: No Healthcare Strategy.
Depending on the study you read, somewhere between 40-60 percent of us will need long-term care at some point in our lives. This type of care can be expensive without the proper planning. As medical expenses increase, there are some additional things to consider when thinking about long-term care:
* Identify the impact that the cost of care would have on your retirement portfolio.
* If your portfolio can accommodate it, consider self-insuring.
* If these alternatives don't satisfy you, consider traditional long-term care insurance, long-term care riders on annuities and long-term care riders on life insurance.
Long-term care expenses can devastate your financial security and the odds of it occurring are too high to ignore it.
Mistake #5: No Tax Plan.
Many people make the mistake of using the services of a tax preparer not a tax planner. The mistakes made here can cost you precious time and money in retirement. Make certain that your accountant and your financial advisor sit down with you and review your tax return line by line so that you can see where you may have money "falling through the cracks."
Through these meetings, you will learn about your largest tax liability and what you can do about it.
At this point, you should also have an "exit strategy" associated with your IRA. What is the plan to protect you against an increase in taxes?
This is just a sample of the information that will be presented at the "Redefining Retirement Forum" on May 24. We hope that you'll join us for what will be a very informative session about retirement planning.
To reserve your seat, please call Cornerstone Retirement at (775) 853-9033.
Chris Abts is the president and founder of Cornerstone Retirement Group. To reach Chris or any of the professionals in his office, please call 853-9033.
SIDEBAR
Retirement planning forum scheduled
On Thursday, May 24, Cornerstone Retirement Group is hosting a retirement planning forum, "Redefining Retirement." Please plan to join us from 3:30-5:30 p.m. at the Nevada Museum of Art for a must-attend seminar designed for those either approaching or in retirement. We've assembled a panel of retirement planning industry experts that will present "The 5 Biggest Mistakes Retirees Routinely Make That Can Easily Threaten Their Financial Security."
These professionals represent the specific retirement needs that most will become familiar with while approaching retirement or within the golden years of retirement. They will share their knowledge on tax planning, investing, legal and finally retirement planning. Our panelists include Mike Bosma of the Bosma Group, Don Ross from Woodburn and Wedge and Geoff Frazier of Global Financial Private Capital. Our panel will be moderated by John Seelmeyer, editor and publisher of the Northern Nevada Business Weekly.
Chris Abts
