"An onslaught of retiring baby boomers; the uncertain duration of Social Security funding; difficulty with workplace retirement accounts like 401(k)s—even if these factors were stronger than they are now, you’d still have a heavy burden in managing your finances during retirement", says financial planner Carl Edwards.
Edwards reviews seven essential points that everyone should know regarding retirement planning.
1. Avoid trying to time the market. Markets often move in cycles and some investors believe that they can boost their investment returns by buying at the bottom and selling at the top.
2. Use risk-appropriate financial vehicles. Retiring can be a risky business. The days of relying on employer-provided pension plans are largely over and retirees now have to deal with risks including investment, inflation, healthcare, longevity and others.
3. Invest in the most tax-efficient manner. Taxes can take a big bite out of investment returns, which is why we stress tax-efficient planning with our clients.
4. Complete a cash flow analysis. Retirement will involve major changes to your finances. Sources and timing of income will change and financial priorities may shift as you start generating income from retirement savings.
5. Guarantee your required income.
6. Utilize longevity planning. Today’s retirees are living longer than ever and many worry about outliving their assets.
7. Consider the effects of inflation. Inflation is one of the biggest issues facing retirees because they are disproportionately affected by rising prices.