Measure Twice, Cut Once
We were chomping at the bit to move into our new office a couple of weeks ago...
After unexpectedly having to leave our leased space, we had been in limbo for a while.
The contractors are still putting the finishing touches on everything, but one thing has stood out to me: There is a lot of precise measuring involved in installing flooring, wainscoting, crown molding, and just about everything else.
If something is even an inch or two off, you can end up with an eyesore that drives you nuts!
Some Miscalculations Are More Costly
Fortunately, most small miscalculations in life are not disastrous. Forgetting to make the bed or take out the trash probably will not change the course of your future.
But miscalculating how much income you will need in retirement can have much greater consequences.
If you underestimate your expenses, you may withdraw too much from your investments. If you overestimate them, you may unnecessarily delay retirement or live more cautiously than needed.
That is why determining a realistic retirement budget is one of the most important steps in preparing to retire.
Will Your Retirement Income Be Enough?
During our working years, it can be easy to become relaxed about spending. Another paycheck is usually coming in a week or two.
Retirement changes that.
Instead of receiving a paycheck from an employer, you may need to create your own income from Social Security, pensions, retirement accounts and other savings. In many ways, you become your own pension manager and your plan may need to last 30 years or longer.
Without knowing what your lifestyle actually costs, it is difficult to answer some of retirement’s biggest questions:
When can I reasonably retire?
How much income will I need each month?
How much can I safely withdraw?
How should my retirement accounts be invested?
Could a major market decline disrupt my plans?
Giving Every Dollar a Job
Once we understand your income needs, we can begin assigning different roles to your retirement savings.
Money needed for near-term expenses may need to be positioned more conservatively. Money that will not be needed for several years may remain invested for potential long-term growth and to help address inflation.
This type of planning may also make market downturns easier to navigate. When near-term income needs have been considered in advance, you may feel less pressure to sell long-term investments during an unfavorable market.
The goal is not simply to invest for today. It is to build a strategy around when you will need the money and what you need it to accomplish.
Are You Within Five Years of Retirement?
When we first enroll in a 401(k), most of us select a few investments, begin contributing and hope the account grows over time. That may work well during our accumulation years.
However, when we get within approximately five years of retirement, the questions begin to change. It is no longer just, “How much have I saved?”
The more important question becomes, “How will these savings help provide the income I need throughout retirement?”
If you are approaching retirement and are unsure how much your desired lifestyle will cost or whether your current investments are positioned to support it, we would be glad to help you work through those questions.
Call us at 864.641.7955 or email us at hello@clientsexcel.com to request a Retirement Income Review.
Until next week,
David C. Treece,
Financial Planner
Clients Excel Blog
