Retirement should be free of financial worries. It should be a time to invest in that 46-inch SuperMag driver and spend the time on the golf course you promised yourself years ago. Or maybe it’s the time to savor your passion for fishing, or travel to see people and places that bring you joy.
But before you plan your first 18 holes at a Florida winter retreat, or make your blissful travel plans, plan to check in with a seasoned Certified Financial Planner (CFP®) or CPA. You might see a curve ball coming in your direction instead of a long drive headed down the first fairway.
Financial markets, interest rates, political climate, global events—the economy is constantly changing by a number of factors that could impact your financial outlook. But despite the clear inability to predict future events, we all have more control than we think … if we consult a competent wealth advisor to help us plan for twists and turns in the road ahead.
Seeking advice from an expert who can analyze the past, present, and future financial climate alongside your personal situation will help you develop the blueprint and map to achieve your retirement planning goals. Sure, an annual review with a independent wealth advisor will be an investment in the short term, but long-term, research suggests that you could see a significant return on what you’ve invested to get the right answers.
Still not convinced? Here are a few potential factors that could affect your retirement savings—and what you can do about them.
The Rising Cost of Retirement
How can your retirement plans be derailed if you’ve been saving all along? Consider this: whatever amount you estimated needing for retirement 20 years ago is most likely much different today. Circumstances changed along the way, and expenses for retirees are higher than ever—they’re living longer, paying more for healthcare, housing, and everything in between. What’s more? Future investment returns are expected to be lower.
According to a new report by the Social Science Research Network, the demand for stocks since 1980 has caused expected returns to fall below their historical average. A decrease in bond yields means that the price of one dollar of income for a retiring individual is twice as high today as it was in 2000. In order to combat these tides of uncertainty, it’s imperative to increase the amount that you’re saving, or modify your expectations for what retirement might look like for you.
Changes in Health Care
There are also imminent changes expected in the health care system. As politicians discuss the proposed repeal or replacement of the Affordable Care Act, the outcome of that decision could have a significant impact on those with Obamacare plans and those on Medicare.
Time reports that Medicare could be cut in order to fund an Affordable Care replacement. Obamacare levied additional income taxes on higher earners rather than trim benefits for Medicare recipients. Retirees and beneficiaries of Medicare may soon find that free preventive screenings such as mammograms or colonoscopies disappear and higher prescription drug costs begin eating into their savings.
Predicting Income Needs
There are quite a few alarming statistics when looking at today’s workers’ ability to retire. This Washington Post study finds only about 10 percent of people retired because they had built up sufficient savings, but almost 50 percent of people retired earlier than planned because of circumstances beyond their control. In many cases, older workers face health problems or disabilities that impede their capacity to sustain mental or physical requirements of their job.
Other factors can also greatly impact how much income you’ll need to preserve your desired lifestyle in retirement. Your spouse may pass away unexpectedly, or you may find yourself sandwiched between your kids’ and parents’ financial difficulties. Sitting down with an independent wealth advisor regularly will help you assess the individual risks you face and determine whether your insurance coverage and emergency funds are sufficient.
Navigating the Path to Retirement
However number savvy you think you may be, it’s well worth having an experienced professional by your side to help with financial planning. Your retirement horizon, current needs, potential changes, tax and investing needs, and estate planning considerations conjoin in complex ways to create a variety of potential outcomes and opportunities you might not foresee.
Think of a financial planning professional as your personal GPS; they’ll continuously determine your financial “geolocation” and recommend the best route to arrive at your destination. The knowledge, tools and resources inherent to a qualified and competent advisor (as well as their experience of financial terrain) allow them to foresee the potential hazards or delays that may hinder your retirement designs.
Turning a Curve Ball into a Hole-in-One
Bad decisions occur when they are made under duress. Good decisions are borne from the confidence in knowing you’ve left no stone unturned. The combination of intention (what do I want to achieve?) and attention (how can I achieve it?) will consistently produce the best outcomes.
Whether you’re starting from scratch or revisiting a current plan, make sure you’ve done all you can to secure your future wealth. While money can’t buy happiness, a solid retirement plan will allow you to sleep much better at night.
Lou Colella, CFP®, CPA/PFS is Managing Principal and Senior Lead Advisor for JFS Wealth Advisors, an independent wealth management firm providing comprehensive financial planning help for high net worth individuals, families and professionals. Need help navigating your personal financial needs? Contact Lou at firstname.lastname@example.org