“By failing to prepare, you are preparing to fail.” - Benjamin Franklin
I’ve been told that Mr. Franklin had one or two wise thoughts in his day, and this one in particular applies directly to our work of helping clients prepare for retirement. In today’s post, I want to talk about three of the biggest risks to reaching your retirement goals.
1. Failing to properly prepare for retirement
Inadequate planning is a major risk we see frequently when a new client comes to Creekmur Wealth. Most people work hard at their jobs and make it a priority to save for their retirement. Unfortunately, most people simply don't have the time, experience, or knowledge to create a comprehensive, coordinated retirement plan.
An ideal retirement plan will combine tax planning, risk mitigation, an integrated investment strategy and more in a way that optimizes your resources and allows you to reach your goals efficiently and confidently. Can you reach your goals by saving into an employer 401k, investing in a 60/40 mixture of stocks and bonds, and buying a term life insurance policy? Absolutely. But, by coordinating investments, taxes, and risk management solutions into a cohesive strategy, we can add hundreds of thousands—even millions—of dollars to a given client’s retirement. Who wouldn’t sleep better at night with such a plan?
2. Failing to save enough for retirement
Not setting enough dollars aside for retirement is another big risk facing many pre-retirees. I talked about “how much is enough?” in a previous blog post. Without a plan in place, we may not know how much is enough. So while it’s usually a smart idea to max out any matching contributions in an employer retirement plan, that alone may not be enough to properly prepare you for the retirement you desire.
I tell clients all the time that anyone has the ability to retire at any age—65, 55, even 35—but it’s our desired level of spending during retirement that can stand in the way of that desired retirement age. As part of being prepared for retirement, it’s important to know how much you need to be setting aside each day/month/year in order to allow you to retire at your desired age.
The final risk we’ll discuss today lies in failing to coordinate the previous two risks. Not having a plan for retirement is a major risk, failing to invest enough for retirement is a major risk, so naturally failing to have a plan for your investments is another major risk to retirement! There is no one-size-fits-all investment approach. A rule of thumb tells us that younger investors should be more aggressive and older investors should be more conservative. But, each individual has their own unique goals and timeframes so their investment approach may need to be equally unique.
Retiree #1 may be able to take on a large amount of investment risk if their expenses are covered by a pension. Retiree #2 may need to be more conservative if they rely solely on their investments for income. A third retiree may be covered by the same pension as Retiree #1, but they may need to be more conservative with their investments because they are pulling dollars out to cover medical costs.
Lack of an investment plan for each of these retirees can result in misaligned risk levels and timeframes and could reduce the effectiveness of the portfolio or threaten the success of the retirement as a whole.
Now that we have successfully waded through the doom and gloom of a few ever-present retirement risks, I want to remind you that it's never too late to start planning. At Creekmur Wealth Advisors we factor these risks into the recommendations and solutions we prepare for each client.
If you are not sure how your retirement plan addresses these roadblocks to retirement, give us a call. We're here to talk!