Retirement used to conjure up images of lazy days spent in a rocking chair. Today’s retirement is very different. What does this redefined retirement mean to you? There is no one answer. In the coming decades, “retirement” will mean something different to each of us.
Income Is Key
A good starting point might be to examine your sources of retirement income. If you pay attention to the financial press, you’ve probably come across at least a few commentators who speak in gloom-and-doom terms about the future for American retirees, decrying a lack of savings and warning of the imminent growth of the elderly population.
This makes it even more important for individuals to understand their goals and have a well-thought-out financial plan that focuses on the key source of retirement income: personal savings and investments.
As you move through the various stages of the new retirement your plan may require adjustments along the way. Consider these factors:
- Time: You can project periods of retirement, reeducation, and full employment. Then concentrate on a plan to fund each of the separate periods. The number of years until you retire will influence the types of investments you include in your portfolio.
- Inflation: While lower-risk fixed-income and money market investments may play an important role in your investment portfolio, if used alone they may leave you susceptible to the erosive effects of inflation. To help your portfolio keep pace with inflation, you may need to maintain some growth-oriented investments. Over the long-term, stocks have provided returns superior to other asset classes.1 Keep in mind that stocks generally involve greater short-term volatility.
- Taxes: Even after you retire, taxes will remain an important factor in your overall financial plan. If you return to work or open a business, for example, your tax bracket could change. In addition, should you move from one state to another, state or local taxes could affect your bottom line. Tax-advantaged investments, such as annuities and tax-free mutual funds, may be effective tools for meeting your retirement goals. Tax deferral offered by workplace plans — such as 401(k) and 403(b) plans — and IRAs may also help your retirement savings grow.
Prepare Today for the Retirement of Tomorrow
To ensure that retirement lives up to your expectations, begin establishing your plan as early as possible and consider consulting with a professional.
1Past performance is no guarantee of future results. Stock investing involves risk including loss of principal.
Information provided by Matt Stahr, president, VisionPoint, 1601 Westlakes Parkway #200, West Des Moines, (800) 282-4032