Retirement Planning is a Game of Chess

Keep Retirement Strategy in Mind This Holiday Season

With the holidays rapidly approaching, a goal often set during these times is to diversify your retirement funds. With retirement investment there are two main focuses: investing/saving and distribution. During retirement you are at your most vulnerable financially because a regular paycheck is not coming in. It is the longest self-imposed period of unemployment most folks face. The following is fantastic advice for when you are trying to invest.

Your retirement planned around living and may seem expensive to support. Remember, roughly 55% of folk live beyond their life expectancy. So, it is important to plan for the long haul. A long-term investment sustains a better savings, but there are risks being found there. Short-term investments usually have higher yields. It is important to balance these.

Spending now can save more money for the long road. An example of this is withdrawing properly to avoid provisional income.

Be reasonable when it comes to expectations. Historical returns may not be what your portfolio does. Returns typically fall below the average. However, this can be balance with a diversification of accounts. Though we have historically low interest rates, this means bond returns will not impact retirement much. This will affect those who have retired most.

Heedless of where you are at in retirement planning, relying solely on plans that require higher returns is dangerous. If you expect to make more in the future, that means spending much more upfront. Stocks carry a higher risk than bonds, so they will yield higher return rates. Simply put: Spending more today and expecting higher returns in the future is risky business. The risks and consequences must be evaluated on a case-by-case basis.

Strategy should always be a top priority. Diversifying your retirement portfolio is just a start. Considering all the risks you will face in retirement is the next stop. Putting all your funds in one bucket will expose you to much more risk—taxable, tax-deferred, and tax-free. Integrate different approaches and accounts to combat inflation, tax rates, rate of return, and even long-term care.


Getting Your Retirement Budget Right

Configuring retirement expenses can be a daunting, overwhelming task especially when you are unsure how to approach it. It can be more stressful when you are 10+ years away from retirement still! But to have a secure, successful retirement, it is important to plan; getting a budget together sooner rather than later is a great step in the right direction. Preparing and predicting now will set your retirement off on sturdier grounds.

Use past spending history to help predict how you wish to continue your lifestyle during retirement. Breaking it down into categories, consider some of the following:

-Housing (mortgage, insurance, property tax, utilities)

– Insurances (house, auto, life)

-Transportation (bus pass, car payment, fuel)

-Family (education, holiday/birthday gifts)

-Food (groceries, dining out)

-Entertainment (streaming subscriptions, hobbies, travel)

So…How do you tackle this task? Here are a few tips.

  1. Think in yearly increments. 1 or even 5 years.

Often monthly budgeting is thought of. However, when planning for a retirement it is best to look at the trends of bills and spending over the years. Track back if you can—to the best of your ability—and see how your spending was. Moving forward, think in annual spending. Round up when doing so for wiggle room and accounting for future inflation or taxes. Keep current with the economic and market trends and flux. While these are always evolving, the present always impacts the future, right? Public policies and economic impact do predict for future—your retirement.

  • Consider ‘stages’ of retirement when budgeting.

There are four different ‘stages’ of retirement and each will have specific needs that must be met.

Stage 1 – The Transition. This first stage is not quite retirement, but the chapter before. This is the few years leading up to full retirement. During this time most either are transitioning from their full-time working years—be it training someone to fill your position, semi-retirement, or working part-time in a different field. Most times, spending stays roughly the same.

Stage 2 – The Early Years. The first several years of your retirement are focused on leisure and enjoyment of the self-imposed unemployment. Typically, spending during this time increases as retirees travel more or spend more time with family or partaking in hobbies. Throughout all income brackets, a 30% increase has been observed during these early retirement years.

Stage 3 – The Late Years. While during this later years of retirement overall spending decreases, medical and health expenses tend to increase due to older age and medical complications. Most importantly, planning to have medical, health, and long-term care insurance situated will make these years easier.

Stage 4 – End of Life. Research shows that dying is expensive. Long-term care and medical costs hit a peak during these final years for many retirees. Especially if long-term care is needed, costs for end of life could be near the hundreds of thousands. Much like the Late Years, having long-term care or life insurance in advance for this stage of retirement will help with your retirement budget.

  • Management of the Core 3:

Retirement budgeting has three core factors: housing, transportation, and medical. On average, most people, retired or not, spend most of their monthly income in these three categories. According to a survey done by the Bureau of Labor, those aged 65+, spend 40% of their budget on housing, 16% on transportation, and 14% on medical and healthcare.

Budgeting for housing and transportation should be done annually. Monthly payments, maintenance, set budget for gas, always leaving room for an emergency. If able, put money to the side monthly to build a larger fund, should something happen.

Healthcare and medical costs alone are, sadly, not always the easiest to predict. According to research done in 2019, out of pocket expenses totaled $280,00+ for retired couples during retirement. Yearly this amount will increase due to inflation and life expectancy increasing. Factor in premiums for medical, eye, and dental, planning and saving for those larger medical and healthcare bills may be expected, will lessen the hit to your budget later.

  • One Hit Wonders of Expenses

Somethings to consider during retirement are items that may come due at once where monthly payments may not be permitted. These may include:

-Child’s wedding


-Second home

-Helping your own elderly parents

-Education (yourself or a child)

While the price tag may vary on these, researching into average expenses of weddings in your state or yearly tuition for a university will allow you to prepare for these One Hit Wonders.

  • Is Your Mortgage Paid Off?

Mortgage is a huge factor in retirement budgets. If you have paid off your mortgage, congratulations! That is a huge expense paid off that will impact you positively down the road. It is a major feat to pay off a debt! If you are close to paying off your mortgage, consider contributing more towards your monthly payment. This will allow you to pay it off sooner and help you with your retirement.

Another consideration for your housing is size. A popular choice for retirees is downsizing to cut back on extra, unused space and cut down on expenses. There are various options, too, such as retirement communities that help transition should you have a long-term care event. For retirement housing there are many options, but what should be done is what is best for your financial and physical wellbeing.

  • The Unexpected and Wants v. Needs

As previously discussed, there are unforeseen costs that may arise—i.e., medical services or home repairs. One thing you can predict about the unpredictability is that it may happen. And having emergency funds available is how these unexpected budget hitters do not take you by surprise—or as much of a surprise. The best solution for emergency funds is having 3-6 months of living expenses placed in an account.

Moreover, what will help with budgeting and saving for your emergency fund is considering wants versus needs. Detail your budget for specifics you know will need paid such as: food, housing, utilities. Wants may include expensive hobbies, traveling. Deciphering what is needed and what is wanted will help tremendously with getting your retirement budget prepared.

  • The Best for Last: Create a Retirement Plan

Tackling a budget and a plan for retirement is the best thing you can do for your future. It allows you to set expectations for your retirement and know how you need to fund it. Having the best plan laid out will even reduce and potentially eliminate risks you will face. The more detailed and personalized your plan is, the better off you will be.

Unsure where to begin with a retirement plan? Meet with one of our certified Retirement Risk Advisors to create and discuss a plan with you!