Who Is Retirement Planning Important For?
Pop quiz: Who can benefit from comprehensive retirement planning?
A: Someone who is still working and still 15 years from retiring
B: Someone who is two to three years from retirement
C: Someone who is already retired
This may have been a bit of a trick question, but the act of creating a well-thought-out retirement plan is no joke.
Given that most people would like to retire at some point in their lifetime (or at least cut back on the time they spend working during their Golden Years), we find that just about anyone can benefit from retirement planning.
At Linscomb & Williams, we see three main groups of individuals who come to us for a financial plan for their retirement:
- Young professionals, energy executives and business men and women who haven’t yet saved enough to support themselves in retirement. They either need help getting started, or want us to check on the progress of an existing plan;
- Individuals and couples who believe they are well-prepared to retire but desire the assurance of a second opinion, and want us to analyze their progress to ensure they’re on the right track; and,
- Retirees who have already left the working world, but want us to evaluate their plan to determine if any changes are needed to help ensure they won’t run out of money
In fact, it may surprise many of you that the best time to seek a comprehensive retirement plan is well in advance of your planned retirement horizon. How so? The earlier you start investing and saving, the better. The magic of compound interest is real – this is when your money starts to make money and you’re able to earn interest on your interest. The sooner this happens, the more money you are likely to have when you retire. Albert Einstein called it the eighth wonder of the world.
When to Review Your Plan
Here’s another pop quiz: When should you review your retirement plan?
A: When you near retirement and plan to soon begin to rely upon your investments to replace your paycheck
B: When you experience a life-changing event, such as marriage, the birth of a child or the loss of a spouse
C: After you retire
Again, all joking aside, it’s very important to review your retirement plan on a regular basis. If your initial assumptions are flawed and you don’t recognize that, you may be facing some painful changes down the road.
Changes in your life can also have a dramatic effect on your finances.
For example, if you get married, does your spouse also have retirement income sources for the future? Have your plans for retirement changed? Will you be buying a home soon, upgrading into a larger house or moving to a different area? Different states and cities have different laws and tax benefits.
If you have a child, surely your expenses will increase. Will you plan to pay for a future wedding or college education? Is your estate planning in order?
If you lose a spouse, will you get life insurance or part of your spouse’s retirement or pension plan? Are your beneficiaries up-to-date? Have your plans for the future changed?
A similar dynamic applies when you head into retirement. If you misjudge how much you can afford to withdraw from your retirement savings, the returns your savings will generate or the level of risk you should take with those savings, it can deal a serious setback to your ability to live the type of lifestyle you’d like to live in retirement.
This, again, is why we asked our initial question: Who is retirement planning important for? As you can see, major events happen throughout your life, so we think it’s never too early to start planning.
The Benefits of Working With a Financial Advisor
Don’t worry, no pop quiz here. Just a simple question: Should you be working with a financial advisor?
We get this question a lot. Many people think they can handle their finances on their own – “My situation isn’t that complicated; I’ve got it.”
But what if you don’t?
If you have a background in the financial services industry; have a passion for watching the financial markets; are inclined to make decisions that are not based on emotion but facts and numbers; are well-versed on estate planning laws, tax benefits and how Social Security works, then maybe you do have it covered. For those who don’t, we’ve created this complimentary eBook just for you: Should You Hire a Financial Advisor or Do It Yourself? You can download it here.
Weigh the pros and cons, consider your future and the nest egg you’ve worked hard to set aside and decide which path is right for you. If you have any questions, contact us. Linscomb & Williams has worked with families in Texas since the early 1970s. We’ve seen many different scenarios, markets and family situations. Chances are, in that time, someone has asked us the same questions you have.
Planning for retirement is exciting, but it can also be challenging and complex. There are a number of factors to consider. Simply setting aside a certain amount of money each month or year and hoping it will suffice should not be a substitute for a rigorous analysis of your retirement income needs and what steps you can take today to properly prepare yourself for the future.