Sign Up for ORTHOPRENEUR news & articles
Retirement Planning, Post-Recession
Posted in Wealth Management Solutions | Jan 2011 | Comments (0)
Page 1 of 2
As you might expect, post-recession retirement statistics are not pretty. Nearly 25% of professionals aged 50 to 59 lost more 35% than of their retirement savings in the 2008-2009 recession last year, according to The Wall Street Examiner. Does that mean you need to work longer or lower your expectations for retirement living? My answer is unequivocally “No!” Retirement can and should be a golden time of your life. Even if your 401k is now a 201k, there are still many nuggets of financial wisdom available to you.
Even with the extension of the Bush-era tax cuts, changes in tax law are imminent and a certainty for 2011 under the current administration. The market has snapped back and is on an upward trajectory (S&P is up 9.4% from 12/31/2009 at the time of writing this) --so planning now is essential, especially if you wish to retire within the next five to ten years.
One of the first questions to ask is, “How much money do I need and how do I get there?” The retirement planning process begins with a personal, in-depth analysis about your lifestyle, risk tolerance, expenses and goals. Here are some significant topics to discuss with your registered investment adviser:
1. What amount do I need to live a lifestyle I will be happy with, possibly less decadent than the original plan?
2. How much money do I need to put away and where -pension, IRAs, 529s, personal taxable savings, real estate, cash, etc.?
Setting a budget for retirement is critical. It cannot be computed simply a percentage of the amount you currently spend because you may not need the same house, wardrobe, number of cars and other common expenses of today. The cost of living has risen at a slower pace over the last few years. So set the budget in today’s dollars and inflate or deflate it for the time you retire.
Modifying your spending habits today and increasing savings is another big opportunity. You might consider downsizing your home, moving to another state where the tax laws are more favorable, or reducing your commute and travel expenses. The excess cash can then be invested as part of the retirement strategy process. Refinancing today, with home mortgage rates at their lowest in decades, will also release cash for additional investment in your retirement plan.