Importance of Planning for Your Retirement

So You're About to Retire. Now What?

If you've been responsibly saving for your retirement over the years, congratulations! However, while successfully building a nest egg is quite an accomplishment, remember that what you do after you retire can be just as crucial to your long-term financial health as what you did to prepare for your retirement. In other words, after you retire, you need to have a plan.

Determine your income needs and take stock. If you're getting close to retirement, now is a good time to evaluate your situation and figure out how much income you may need after retirement. Check your accounts regularly, and see if you might need to boost your contributions in order to catch up.

Retirement Planning

In a financial context, refers to the allocation of savings or revenue for retirement. The goal of retirement planning is to achieve financial independence.Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program, and managing assets and risk.

Retirement planning is important because it can help you avoid running out of money in retirement. Your plan can help you calculate the rate of return you need on your investments, how much risk you should take, and how much income you can safely withdraw from your portfolio.

Retirement Advisors

These financial professionals help you set financial retirement goals and develop a plan to reach them. They can also help qualify, prioritize and quantify your retirement goals. Additionally, your advisor can act as a champion to keep you focused as you approach retirement age.

If you are looking to save for retirement, or are at retirement and need to live off of the income generated by your assets, you may need the help of a financial advisor. Not all financial advisors specialize in retirement planning, and so a qualified and knowledgeable retirement advisor should be sought out.

If you are still working, you may want to ask your employer if they have a fiduciary advisor, which by definition, is an advisor who is paid a retainer by an employer to advise employees on their retirement plan investments, as well as to provide a complete range of other products and services.

Fiduciary vs. Financial Advisors

The biggest difference between fiduciary vs. financial advisor is the standard they're held to when advising clients. Most financial advisors have to sell investments that are suitable for clients, but fiduciaries must act with a higher standard of care.

The Fiduciary Duty of a Financial Advisor

A fiduciary financial advisor must act in clients' best interests and disclose conflicts of interest. In legal terms, a fiduciary is an individual or organization that has taken on the responsibility of acting on behalf of another person or entity with utmost honesty and integrity. For example, bankers, attorneys and officers of public companies are all fiduciaries, meaning they must act in the best interest of their customers, clients or shareholders. If they don't, they are legally liable.

Similarly in the investment world, fiduciary financial advisors manage client assets with the clients' best financial interests in mind. Therefore, be sure to limit your search for a financial advisor to only fiduciary advisors in your area.

Financial Advisors

A financial advisor is a professional who suggests and renders financial services to clients based on their financial situation. In many countries financial advisors have to complete specific training and hold registration with a State or the SEC to provide advice.

Financial advisors assess the financial needs of individuals and help them with investments (such as stocks and bonds), tax laws, and insurance decisions. They help clients plan for short-term and long-term goals, such as education expenses and retirement. They recommend investments to match the clients' goals.

Planning Your Retirement

Planning for retirement starts with thinking about your retirement goals and how long you have to meet them. Then you need to look at the types of retirement accounts that can help you raise the money to fund your future. As you save that money, you have to invest it to enable it to grow.

The surprise last part is taxes: If you've received tax deductions over the years for the money you've contributed to your retirement accounts, a significant tax bill awaits when you start withdrawing those savings. There are ways to minimize the retirement tax hit while you save for the future-and to continue the process when that day arrives and you actually do retire.

When to Start Retirement Planning

Ideally, you'd start saving in your 20s, when you first leave school and begin earning paychecks. That's because the sooner you begin saving, the more time your money has to grow. Each year's gains can generate their own gains the next year - a powerful wealth-building phenomenon known as compounding.

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