Planning for retirement can be a time of great anticipation as well as great anxiety. And, given the current economic climate, many individuals have changed their plans for retirement by either pushing back their retirement date or have considered working part time during their retirement to supplement their fixed incomes.
According to Jim Cantrell, a certified financial planner and owner of Financial Strategies, Inc. in Brookfield, Wis., while some people close to retirement have changed their goals or approach, others simply don't know what to do.
He provides the following five tips to help create a solid financial plan for the future:
Source: Financial Strategies, Inc.
- Know what you are going to do. If you have grandiose thoughts of spending months in exotic destinations, you will need to put a bit more into your retirement fund than if your goal is to do volunteer work and stay close to home. One of the best ways to ensure that your future plans are appropriate for you is to get involved in activities that are of interest before you retire. For example, if you plan to spend your time volunteering, consider giving a few hours a week before retirement to see if this will work with your future plans. Additionally, if relocation is part of your retirement goal, spend time vacationing in the areas you could potentially call your future home.
- Know your benefits. It is important to talk to your organization's human resources department well before you plan to retire. Consider items such as health insurance, pension and stock options. Each of these things could have a big impact on your finances once you are retired.
- Diversify your stock options. As you approach retirement, it is important to ensure that you do not have an over concentration of stock positions. Sometimes senior management and upper level executives have a lot of their portfolio tied up in their company; however, once they retire, they will not have the same level of control in the direction the company takes. Having all your eggs in one basket (or a lot of them) is never a good idea, this is why it is important to consider diversifying your investment portfolio.
- Move to stable investments. As you approach retirement (approximately five to seven years prior), consider shifting your investment portfolio from a higher percentage of equities to less risky, fixed or stable investments. This will make your portfolio a much safer place to go and get your money when you need it.
- Have a solid plan. How much will you need to put away to live the lifestyle you currently enjoy, or what things do you plan to cut out? Know what you currently have available and what you will need and put it all down in a solid and workable plan. One of the best ways to ensure that you have a solid plan is to meet with a certified financial planning practitioner (a fee-only advisor is recommended) to create a program that meets all your future needs.
Published with permission from RISMedia.