Retirement planning is a lengthy process that evolves with time. To have a secure, comfortable, and fun retirement, you need to build the financial cushion that will fund it all. The fun part is why it makes sense to pay attention to the serious and perhaps boring part: planning how you will get there. So, let us

Start by learning the five steps everyone should take, no matter what their age, to build a solid retirement plan. Continue reading…

Retirement Wishes


  • Remember that time is an important factor


Your current age and expected retirement age create the initial framework of an effective retirement strategy. The longer the time between today and retirement, the higher the level of risk your portfolio can withstand. If you are young and have 30-plus years until retirement, you should have the majority of your assets in riskier investments, such as stocks. Though there will be volatility, stocks have historically outperformed other securities, such as bonds, over long time periods. Moreover, you need returns that outpace inflation so that you can maintain your purchasing power during retirement. In general, the older you are, the more your portfolio should be focused on income and the preservation of capital. This means a higher allocation in securities, such as bonds, that won’t give you the returns of stocks but will be less volatile and provide the income you can use to live on. You will also have less concern about inflation.



  • Determine your needs after retirement


Having realistic expectations about post-retirement spending habits will help you determine the required size of a retirement portfolio. Most people think that after retirement, their annual spending will amount to only 70% to 80% of what they spent previously. Such an assumption is often proved to be unrealistic, especially if the mortgage has not been paid off or if unforeseen medical expenses occur. Retirees are also likely to spend their first years splurging on travel or other bucket-list goals. Additionally, you might need more money than you think if you want to purchase a home or fund your children’s education post-retirement. Those factors have to be included into the overall retirement plan. Remember to update your plan once a year to make sure you are keeping on track with your savings.



  • Calculate the actual after-tax rate of return


Once the expected time horizons and spending requirements are determined, the after-tax real rate of return must be calculated to assess the feasibility of the portfolio producing the needed income. A required rate of return in excess of 10% (before taxes) is normally an unrealistic expectation, even for long-term investing. With age, this return threshold goes down, as low-risk retirement portfolios are largely composed of low-yielding fixed-income securities. Depending on the type of retirement account you hold, investment returns are usually taxed. Therefore, the real rate of return must be calculated on an after-tax basis. However, determining your tax status when you begin to withdraw funds is an essential component of the retirement-planning process.



  • Assess the risks being taken in your portfolio


Whether it is you or a professional money manager who is in charge of the investment decisions, a proper portfolio allocation that balances the concerns of risk aversion and returns objectives is arguably the most important step in retirement planning. How much risk are you willing to take to meet your objectives? Should you set aside some income in risk-free treasury bonds for required expenditures? You need to make sure that you are comfortable with the risks being taken in your portfolio and know what is necessary and what is a luxury. Remember that this should be seriously talked about not only with your financial advisor but also with your family members.



  • Pay attention to estate planning


Estate planning is another important step in a well-rounded retirement plan, and each aspect requires the expertise of different professionals, such as lawyers and accountants, in that specific field. Life insurance is also an important part of an estate plan and the retirement-planning process. Having both a proper estate plan and life insurance coverage ensures that your assets are distributed in a manner of your choosing and that your loved ones will not experience financial hardship following your death. A carefully outlined plan also helps in avoiding an expensive and often lengthy probate process. A common retirement-plan investment approach is based on producing returns that meet yearly inflation-adjusted living expenses while preserving the value of the portfolio. You are advised to consult a tax advisor to help you determine the correct plan for yourself.


The burden of retirement planning is falling on individuals now more than ever. One of the most challenging steps towards creating a comprehensive retirement plan is striking a balance between realistic return expectations and a desired standard of living. The best solution to this is to focus on creating a flexible portfolio that can be updated regularly to reflect changing market conditions and retirement objectives.