Many people spend years dreaming about retirement, only to discover a new worry takes its place: "Can I afford to keep living the way I want?"
No one wants to spend retirement second-guessing every purchase or worrying that an unexpected healthcare expense could derail years of careful planning. The good news is that with the right preparation, sustaining your lifestyle in retirement is an achievable goal.
Here are four important areas to consider as you build a retirement plan designed to support the life you've envisioned.
Identify Your Income Sources and Manage Fragmentation
Before assessing what type of lifestyle you can lead in retirement, you must first identify where your retirement funds will be coming from. Common sources include:
Qualified retirement accounts such as 401(k)s, 403(b)s, and 457(b)s
Traditional or Roth IRAs
Health savings accounts (HSAs)
Social Security benefits
Investment portfolios
Life insurance policies
Annuities
If you’re like many professionals, you may have multiple retirement accounts that are not consolidated. This is called fragmentation, and it can eat into your income stream by causing larger tax liabilities.
For many retirement accounts, required minimum distributions, or RMDs, generally begin at age 73. These rules apply to traditional IRAs and many employer-sponsored retirement plans, though some workplace plans may allow non-owners to delay RMDs until they retire. Roth IRAs do not require RMDs during the original owner’s lifetime.
If you have multiple accounts subject to RMDs, coordinating withdrawals carefully can help you manage taxable income and avoid unnecessary complexity. Consolidation may be helpful in some cases, but it should be reviewed carefully because rollover and transfer rules vary by account type.
Where Is Your Money Going?
Our clients often come to us with concerns about how soon they will be able to retire, whether they can maintain their desired lifestyle, and how to make sure they won’t run out of money. A crucial part of answering those questions comes from budgeting and tracking expenses.
Without understanding your retirement needs, there is simply no way to assess where you stand. It’s important to record every expense you can realistically estimate, including basic living expenses, mortgage and debt payments, life insurance, health insurance, and long-term care.
It’s often said that retirees should plan to spend about 80% of their pre-retirement income on their post-retirement lifestyle, but in practice, that number is very subjective. The amount of income required largely depends on the type of lifestyle you want to lead, which is even more of a reason to plan ahead.
Assess Your Level of Risk
Once you have a complete picture of your finances, you will be able to determine whether you’re on track for retirement. At this point, you can evaluate the level of risk in your portfolio and make any necessary adjustments.
If you find that you are not on track for the lifestyle you want to lead, you can consider investing in riskier assets with the hope they will earn a bigger return or you can extend your retirement timeline.
Conversely, if you find you are on track for retirement, you can consider reducing your overall level of risk and invest in more conservative assets. Either way, your risk tolerance is just one aspect of your full financial situation, and, as such, it must be analyzed as one piece of a much larger puzzle.
Strategies for Sustaining Your Lifestyle in Retirement
A thoughtful plan is one of the best tools for sustaining your lifestyle in retirement. Regular reviews can help keep your income, investments, and spending aligned with your long-term goals, even as life changes.
At Premier Planning Group, we're here to help you navigate every stage of retirement with confidence. Call our office at (443) 837-2520 or email my executive assistant, Talia Grover, at taliagrover@premierplanninggroup.com to set up a complimentary consultation.
About Brion
Brion Harris is the CEO, founder, and managing partner of Premier Planning Group, an independent financial firm specializing in working with pre-retirees and retirees, helping them create customized wealth preservation and retirement distribution strategies. With over 20 years of experience, Brion has developed deep knowledge and skill in helping his clients simplify their finances and find confidence in their financial future. Brion and the Premier Planning team are known for their unparalleled client service and their dedication building long-lasting relationships with their clients. As a result, Brion has been the recipient of the #1 Advisor Leadership Award* at Summit Brokerage Services for eight years running.
Brion is a proud 20-year resident of the Annapolis community, where he resides with his wife, Elizabeth, their three children, Addison, Jay, and Scarlett, and their two dogs, Pepper and Coco. When he’s not working, you can find him boating, skiing, traveling, and enjoying good food and music with his family. If you want to learn more about Brion, connect with him on LinkedIn.
*The #1 Advisor and Leadership Award is based on production data while at Summit Brokerage Services, Inc. Brion Harris received the award in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021. This award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client.