FEATURE — If you are unsure if you are putting away enough for retirement, an annual financial review will help clarify whether your existing portfolio allocation aligns with your needs and objectives.
Retirement is a timeline of “decumulation,” when people draw money from income sources they have built up over many years. It makes sense to review your plans and strategies each year and ensure you are preserving your life savings so they can be tapped for dependable income streams during retirement.
Do you currently have a wealth accumulation strategy in place, or is your strategy tailored toward preserving what you have accumulated? If retirement is a near-term milestone, within five years out, each year you may plan to transition some of your investments from a growth-focused financial strategy to one emphasizing wealth protection.
As retirement approaches, consider securing the “safe money” portion of your retirement portfolio. In retirement planning, “safe money” is the money you cannot afford to lose. For many people, that encompasses money to pay for their retirement lifestyle, including monthly living expenses such as housing, clothing, health care costs and hobbies.
Safe money options are based on the guarantees that make them safe:
- US Treasuries guaranteed by the full faith and credit of the United States government.
- Bank products guaranteed by the Federal Deposit Insurance Corporation.
- Insurance company annuities guaranteed by each state’s insurance guarantee fund (amount of the guarantee is state of residence specific).
Evaluate your financial circumstances in terms of risk management and determine if the money you will use for these expenses is protected from risk factors like the following:
- The stock market falling or correcting.
- Your taxes increasing.
- Bond values dropping.
- Your tax liability rising.
Does your strategy account for future income needs? Wealth protection can be an important focus for people near their retirement age, but a well-thought-out financial plan will consider future income needs, as well.
Dependable, lifelong income streams can include:
- Social Security benefits.
- Possibly pension payouts.
- Money drawn from a retirement portfolio and other sources.
Predictability and reliability are two important values in income planning outcomes. If it truly makes sense for your financial profile, guaranteed insurance-based strategies, which assure lifelong, permanent income and protect your money from down-markets might be a consideration.
Consult your financial adviser to make sure you identify all of the options available based on your unique circumstances and how they fit into your overall retirement plan.
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