Retirement Planning: An Overview

If retirement is in your distant future, you’re in luck. You have time to create a plan that’s customized to your resources, your priorities and your goals. If you’re nearing retirement, this is the time to meet with a financial advisor to find out how well your plan is working and whether adjustments are needed to preserve your assets, growth your wealth and provide the standard of living you want to maintain in retirement.

A comprehensive retirement plan includes many components—your investment portfolio, your 401(k) or other plan at work, your IRA, and Social Security. Your financial advisor can help you establish a customized strategy that integrates these components to support your retirement goals.

Qualified retirement plans, such as a 401(k), 403(b), 457 or other profit-sharing plan, are one of the most beneficial ways to save for your future. Many employers will make contributions on your behalf. These plans also allow you to make either pre-tax contributions and/or possibly after-tax or Roth 401(k)/403(b) contributions. The advantages to you are: 

Your personal investment portfolio is a key component in ensuring your ability to achieve and maintain the standard of living you want during your retirement years.
  • You do not pay any current income tax on your employer’s contribution
  • Earnings on investments made by the plan build up tax-deferred
  • If qualified, distributions from the after-tax or Roth portion of your account will be made free from federal taxes
  • You will receive income for your retirement
  • If the plan or your participation in it ends, you or your heirs will have the benefit of at least a portion—and perhaps all—of your employer’s accumulated contributions

An Individual Retirement Account (IRA) is an individual qualified savings plan you set up and contribute to yourself. It can be a key component of your financial plan. These savings vehicles offer tax-deductible contributions, depending on your income level and earnings, that are not taxed until they are distributed, usually after you retire.

You may also want to consider a Roth IRA, which does not allow you to deduct your contribution from current taxes; however, your future withdrawals, subject to certain conditions, may be tax-exempt.

If you are facing a shift in job status due to retirement or changing employers, and will receive a lump-sum distribution, you should consider an IRA rollover. An IRA rollover is a special IRA into which distributions from qualified retirement plans can be deposited without creating a taxable event.

Your financial advisor can help you evaluate your choices. As with other investments, always consider your investment goals, risk tolerance and time horizons when building a retirement strategy.

Social Security benefits may decline. Currently, Social Security provides only about one-third of the amount needed to maintain an individual’s standard of living in retirement. That percentage may drop as the government considers cost-saving measures such as elimination of cost-of-living adjustments and older ages for starting benefits.

Company retirement plans offer few guarantees, if any. Attractive corporate pension plans are becoming increasingly scarce in today's competitive economic environment. What's more, many of these plans do not provide the guarantees offered by plans in past generations.

Your personal investment portfolio is a key component in ensuring your ability to achieve and maintain the standard of living you want during your retirement years. As you project your income needs, be sure to consider healthcare expenses during retirement, including long-term care and other costs not covered by Medicare or most private insurance plans.

Here are some steps you can take to help ensure your financial future: 

  • Revisit or create your personal financial plan. Identify what you want to achieve financially and in life. The more specific you are, the better your chances of achieving your goals. Build into your plan ranges for your goals and determine which goals are the most important to you.
  • Understand how much investment risk you need to take in order to reach your stated goals. To maintain your standard of living in the years ahead, remain invested in securities that can deliver the types of returns that will help your money grow enough to achieve your objectives.
  • Remember that future returns of the markets are uncertain and therefore your overall plan needs to measure this uncertainty. Constantly monitor your plan to determine whether or not you are on track toward your goals. Regularly check to see if you are saving enough, planning on spending too much, or possibly taking on too much investment risk than is needed.
  • Be mindful of taxes. Tax laws continue to change, making certain financial products more valuable to you than before. Strategies employed long ago may no longer be the most beneficial for your specific needs.
  • Remain diversified. Investing too much money in one type of security can subject your portfolio to an inordinate amount of risk, which can be hazardous to your financial health.

Prudent portfolio management is a cornerstone of every successful long-term plan. Your financial advisor will be happy to review your plan and propose planning strategies that best reflect your current financial situation in relation to your life goals.

Ready to Take Action?
The most effective approach to financial planning is one that integrates all components—investments, insurance, savings for education, savings for retirement, credit needs, charitable giving, tax planning and estate planning—into a unified, coordinated strategy customized to your needs, priorities and preferences.

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