Our Five-Step Retirement Investment Plan for Any Age

Our Five Step Retirement Investment Plan for Any Age

Regardless of the official age you declare yourself retired, planning a retirement investment strategy is crucial. We offer five steps below to help you along in the process.

Consider Your Current Age and Desired Retirement Age

The younger you are and the more years you have to retirement, the higher degree of risk you can take on when planning your retirement investment portfolio. Younger people can earn more money toward retirement by investing in long-term stocks. Although the risk is higher than more traditional types of retirement savings, stocks have typically performed better than securities and bonds. To stay ahead financially, make sure that your investments keep pace with inflation.

Older people may wish to focus more on the preservation of capital and income than on riskier stocks. Bonds can be a good choice for those closer to retirement since they are typically more stable. Inflation is also of less concern than it is for younger workers. Setting specific goals you want to meet before and after retirement can help motivate you to get serious about retirement investment planning.

Understand Your Spending Needs After Retirement

It’s a common mistake for people to assume they will spend less after retirement than during their working years. Some things they fail to account for include price increases, medical emergencies, potentially increased housing costs if moving to assisted living, and leisure activities now that they have much more free time. When planning your retirement strategy, we recommend assuming your expenses will remain the same if not increase.

Be Sure to Calculate Your After-Tax Return on Investment Rate

After determining approximately when you will retire and your expenses in retirement, the next thing to consider is the rate of return after taxes for each of your investments. Remember that the design of most retirement accounts is for investors to save money on a pre-tax basis when making the contributions and then pay tax on them when they withdraw the money. Determining your tax rate in advance can help you plan your retirement finances more realistically.

Know Your Tolerance for Risk

It’s important to realize that some of your retirement investments may lose money rather than help you earn more for the future. Only you can decide how much you’re willing to risk when it comes to investments. People with a moderate level of risk tolerance often do well by choosing a mixture of lower and higher risk investments. Although it’s important to watch the market, you don’t need to panic with every change. The mutual fund doing poorly right now might just be your highest income earner next year.

Start Planning Your Estate as Early as Possible

Part of responsible retirement planning is creating a will to disburse your income and other assets. It also involves not leaving debt behind for your family to pay. Figuring out potential tax issues on gifting your estate to a family member or making a large donation to a charity should be part of the process too.

We realize the above is a lot of information to process. Please contact Aura Wealth Advisors at 573-634-4006 for additional assistance with retirement and estate planning or general wealth management issues.