Shepherd Wealth & Retirement - July 2018

(520) 325-1600 WWW.SHEPHERDWEALTH.COM Your SIMPLE SECRETS TO Retirement Planning WE A L T H JULY 2018 ®

T he number one financial worry in survey after survey is the fear of running out of money in retirement. Whether it’s not saving enough, having investment losses, or medical bills, there are many smaller components that contribute to this financial pitfall. Here are four broad areas to think about so you can pull together a retirement plan that sets you up for success. 1 There are always going to be events that you can predict, and it’s pivotal to have a plan in place for these. I recently helped clients sort through deferred compensation, pension options, stock options, and Social Security choices to figure out cash flow in the early part of retirement. Situations like a forced payout from a deferred compensation plan, stock options that have to be exercised, or a business that is sold are predictable. Summarize these things and put them on a timeline so you can see how they will interact together. 2 When it comes to your income choices, things like Social Security, pension options, and the like, it’s important to understand what steps you can take to give yourself the opportunity to receive the maximum benefit. What are your options

4 What could go wrong? What are the things you need to protect yourself from? Health care costs, long-term care costs, premature death, market losses, death of a spouse, loss of pension ... There is an endless list of things you may want to have insurance or other backup plans for. Now you can project on your timeline when these things might happen. All of this will prepare you for when you do the final step that comes next. The best thing to do at this point is to take all the information you have gathered and put it in a high-quality financial planning program where you can see the long-term effects of the different choices you can make. This will help you confirm your thinking and make better choices, and it can be used on an annual basis as necessary to make sure you’re on the right track and that forward projections and your current path still look good.

when payment starts? Do you know your benefit amounts and beneficiary options for your survivor and spousal protection? When do pension choices need to be made or how long can you defer and let a benefit grow? The answer to these questions can be added to your timeline as items that you have control over. 3 Now add up all your savings and investments and calculate a reasonable, conservative future return that could be made on your investments. One thing to keep in mind when planning your retirement is return consistency is so much more important when you are withdrawing than it is when you are saving. For example, most people have heard that continuing to invest in down markets helps you buy shares at low prices and increases return over time. But withdrawing when markets have fallen and being forced to sell at lower prices for your income needs is harmful to your long-term financial health. This is a great time to find ways to avoid the biggest losses possible in risky assets and find more consistent options to invest in. Now you can show on your timeline the payout amount you expect from your savings and investments.

-Dave Shepherd

• 1 (520) 325-1600

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