Jon Hancock
Making a plan puts you on the road to financial security and comfortable retirement years. The goal is to leave you with sufficient assets so you can maintain your current lifestyle AND pursue new interests that you may develop in retirement. Dog sledding in Alaska? Surfing in California? Sounds like a ton of fun!
Your goals play a big role in how you plan for retirement. You might ask yourself some open-ended questions:
• When would you like to retire?
• What goals do you have for retirement?
• What would you like to do in retirement?
• How would you spend your days?
• Do you enjoy traveling?
• What are your hobbies?
• Do you want to stay in your home or are you considering a smaller place?
• Would you like to live in a different location?
• Would you move closer to family or kids?
• Or would you choose a location based on climate or quality of life?
What might a plan look like?
Most folks want to save for retirement at a more reasonable pace. Here is a moderate plan that works well for a majority of people:
1. Set aside six months of expenses in an emergency fund. While skyrocketing interest rates have hampered stock market performance over the last year, savers can now earn up to 5% risk-free. We’d be happy to point you in the right direction.
Save up to 15% of your income in your company’s 401k. If zero to 15 in one paycheck leaves you short of breath, start small and ratchet it up every couple of months. You won’t miss the cash.
But if it turns out that 15% is too difficult or interferes with other financial goals, at least always capture your company’s match. It’s free money. Why leave any behind?
2. Get out of debt. This includes student loans, credit cards, and auto debt. We can talk about whether you should try to pay down your mortgage in a timelier manner.
3. Max out IRA and HSA. Consider fully funding an IRA account and max out your Health Savings Account if it’s offered as a part of your health coverage.
4 . Are you 50 or older? If so, consider catch-up contributions for retirement savings. For an IRA, you may contribute up to $7,500 in tax year 2023.
5 . I nvest using an asset rotation strategy. “Perfect” doesn’t exist in investing. However, momentum based asset rotation (tilting a portfolio toward performing assets and away from under-performing assets) has been proven to minimize painful drawdowns that we cannot afford as we enter retirement.
There are no easy roads, but a disciplined approach that emphasizes consistent savings, a modest lifestyle based on your income, and minimal debt will serve you well as you travel the road toward financial security and a comfortable retirement.
I hope you’ve found this to be educational and informative. If you have any questions or would like to discuss any matters, please feel free to give me a call at 360-776-6600.