Eight Steps to Prioritize Your Finances as You Head Toward Retirement

Eight Steps to Prioritize Your Finances as You Head Toward Retirement

Virtually every aspect of investment management or retirement planning can be debated. One of the few truths on which there is no debate is that choosing the path that leads to higher returns and long-term sustainable income generation is the preferable outcome.

Reaching that retirement income goal generally involves prioritizing some things over others based on a dispassionate analysis of your current and future financial situation.

How to Go About Prioritizing Your Retirement Plan and Goals

Prioritizing your finances as you head toward your retirement goals is crucial for a comfortable and secure future. There are some general steps you can take to both prioritize asset growth and prepare yourself for retirement.

1. Honestly assess your current financial situation.It’s necessary to be fully aware of your assets, liabilities, income and expenses. Although this may sound straightforward, there are a variety of factors that can make this exercise complicated. Having a variety of different retirement savings accounts, brokerage accounts and investments makes getting a clear and accurate picture of your current-state financial situation difficult. It’s vital to be thorough and honest during this process so your plan is based on reality.
2. Establish clear retirement goals.Choosing a target retirement age and nest egg valuation may be one of the easier decisions for you to make – but things can change. Factors such as life expectancy, inflation, performance of your current retirement savings plans and desired lifestyle in retirement may justify adjustments to your goal or compromises on some aspects of your plan. A retirement planner may be able to help you discover options to help you gain clarity, overcome challenges or eliminate uncertainty.
3. Create a budget.Meeting with a retirement planner early can be hugely beneficial, even for young workers. Your retirement savings investment strategy or current spending habits may need to change based on the age or lifestyle targets you set when planning for your retirement. The earlier you know those targets, the longer you’ll have to plan. Creating a realistic budget can help ensure you aren’t forced to make significant quality of life sacrifices today to meet an ambitious retirement goal.
4. Make strategic debt reduction decisions.Some retirement planners may have debt hurdles to overcome before they can comfortably enjoy a worry-free retirement. Every situation is different, but it often ends up being beneficia to eliminate high-interest debt, such as credit card balances, to enhance your ability to save for retirement and to minimize your expenses in retirement.
5. Build an emergency fund and plan for healthcare costs. The rule of thumb for everyone, from young families to retirees, is to have between three and six months of living expenses saved in an easily accessible emergency account. This type of fund can be of great importance for retirees, especially those who may experience sudden medical emergencies that may necessitate long-term or ongoing care costs. Working with an estate planning professional to establish a plan for medical emergencies, like Medicare supplement insurance, long-term care policies and proper trust planning, can help ensure you or your spouse’s retirement comfort isn’t derailed by unexpected emergencies.
6. Maximize retirement contributions.The sooner workers take full advantage of employer-sponsored retirement plans like 401(k)s or 403(b)s (especially with matching funds), the better off they will be when it comes time to retire. Maximizing contributions isn’t just a tip for soon-to-be retirees at the end of their working years – it’s reliably good advice for virtually every worker, whether they’re in their 20s or their 60s. If you’ve maxed out your contributions or want more self-directed control, consider supplementing your retirement savings with Individual Retirement Accounts (IRAs) or other investment vehicles.
7. Diversify your investments.Diversifying investments is an easy and essentially free way to boost your retirement savings. A diversified investment portfolio may greatly reduce risk and make it less likely that specific market, industry or sector downturns won’t drastically hinder your retirement schedule, budget or goals. Adjust your asset allocation based on your risk tolerance and time horizon until retirement. Rebalance your portfolio periodically to maintain your desired allocation. Consider working with an investment manager to ensure your retirement savings are adequately diversified.
8. Review your plan regularlyYour life, financial situation and the health and stability of markets and the economy are not static. Revisit your financial plan at least annually or whenever you experience significant life changes. Adjust your plan as needed to stay on track with your retirement goals.

Working with trusted retirement planning and investment management professionals can help ensure your retirement planning priorities and strategy makes sense for your age, goals and expectations. Speak with one of the experts at Fullerton Financial Planning today by calling (623) 974-0300.