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Four Steps to Feel More Confident About Your Retirement Plan

Use these Tips to Better Prepare Yourself and Your Finances for Retirement
| By: Randall E. White, CFP®, RICP®, CRPC®, CMFC®

Four Steps to Feel More Confident About Your Retirement Plan
Monday, 24 May 2021

Retirement is momentous, isn’t it? Most people spend their whole lives saving, preparing, and dreaming of this time in their lives. You’re finally “off the clock” and have time to do the things you want to do. Maybe you’ve dreamed of traveling somewhere special, or reading that stack of books you’ve been neglecting, or spending more time with your family. Your retirement is supposed to be a time in your life that you can enjoy with minimal stressors and worry.

Unfortunately, for many retirees, retirement isn’t the worry-free dreamland that they imagined. Almost half of Americans report feeling worried about whether they’ve saved enough money to last throughout their retirements, with only 36% of people saying that they feel confident they’ve saved enough money to be comfortable in this phase of life. So, if you’re feeling more uncertain about your financial situation and retirement preparations than you’d like, know that you’re not alone.

Luckily, there are tangible steps that you can take to whip your finances into shape and improve your financial confidence in retirement. Here are four small steps you can take to help feel more confident about your retirement plan. 

Step #1: Determine what you need to live on each month and what you can afford.

This is a crucial step, and it means spending a month or two tracking your expenses so that you can have a better idea of where your money is spent and where you can cut back. Be sure to pay attention to non-essentials, such as entertainment, restaurants, and fancy clothes. This will help you have a more realistic sense of how much you need each month to live, which will help immensely as you determine how much you will need to have saved for retirement. Using online budgeting and financial planning apps, such as Mint or PocketGuard, can help ensure you stay on top of your tracking.

As you use these numbers to plan for your retirement savings, note that what you spend in retirement will most likely be different than your spending today. So, if you’re currently paying for things like a mortgage, tuition costs for your children, or groceries for your entire family, those costs will most likely disappear come retirement time. Additionally, any current costs you have relating to your work, such as commuting costs, supplementing a business wardrobe, or childcare may also dissipate. Also, the money you’re currently putting aside in retirement plans will likely now be available for spending rather than saving.  That being said, you’ll most likely have new costs that spring up. For instance, out-of-pocket prescription and medical costs may become a bigger financial burden. Perhaps you’ll want to travel or go out more than you did while you’re working, meaning you would increase your spending in new ways.


SEE ALSO: Six Ways to Use ‘Self-Continuity’ to Strengthen Your Retirement Plan


While these differences may make you think that determining your current monthly cost of living is pointless, assuming that some of your current expenses will disappear and others will reappear, it’s reasonable to project that the amount you currently spend will be at least a little bit similar to what you’ll spend in retirement. It all depends on your financial situation, so make sure you take your time and consider all expenses and options as you determine your estimated monthly expenses.

Step #2: Know where your income comes from.

In order to know how much you can afford to spend, you have to know how much money you’re bringing in. Your annual income could come from a variety of sources, such as:

  • Employment Income. This includes any salary, paid wages, overtime pay, tips, or bonuses you may make through working. For entrepreneurs, this would include any income you generate from self-employment and any businesses you own.
  • Social Security and pensions. Your annual income also includes any money you’re receiving from Social Security and pensions, should you be benefiting from these accounts.
  • Interest and dividends. Any interest you make on bank accounts or CDs should be included in your annual income total, as well as any dividends you may be receiving from your investment portfolio.
  • Miscellaneous income. Be sure not to forget any money that you might be receiving from unemployment compensation, gambling wins, inherited or gifted money, or money withdrawn from an IRA, 401(k), or pension account.

As you’re totaling up your income and looking to retirement, keep in mind that for most retirees, Social Security is the largest source of income that they depend on. It’s been reported that up to 65% of retirees get half or more of their income in retirement from Social Security, and over a third of people 65 and older receive around 90% of their income in the form of a monthly Social Security payment.

If you’re feeling stuck or overwhelmed, try this Income Calculator to see if there’s a significant gap between your expenses and your projected income sources.

Step #3: Try to cover your essential expenses with guaranteed income.

Essential expenses should include anything that is required for living, such as groceries, any bills related to your home, insurance, out-of-pocket medical costs, and debt or loan payments. Guaranteed income consists of sources such as Social Security, pension plans, and annuities. Money that comes from investments, savings, IRAs, or 401(k)s is not guaranteed income.

If you’re able to make it work, ensuring that the money you can depend on is enough to cover the basic necessities for a living can help bring you some peace of mind that you’ll be covered as you move through retirement.

Step #4: Seek professional guidance to protect your current financial reality.

Talking with a financial advisor can help you maximize things like Social Security benefits or tax-savings strategies, as well as minimize burdens such as healthcare expenses or savings account penalties and fees. You’ll want to be sure that the advisor you seek out has expertise in financial areas relating to retirement, such as income planning and protection, investment selection and diversification, withdrawal strategies, and planning for long-term care.

It may also be beneficial to speak with a financial advisor who is well versed in taxes and can help you devise a tax strategy for withdrawals from your retirement accounts. A tax expert would be able to provide guidance on the different ways various accounts are taxed and which accounts would work best for your financial situation.


SEE ALSO: Your Retirement Tax Prep List


Closing Remarks

Retirement planning and strategizing can easily begin to feel overwhelming, especially given the importance we all place on feeling secure and happy in this phase of life. It’s okay if you’re feeling uneasy about where you’re at on your retirement planning journey because the majority of people are right there with you. The reality is, you deserve the retirement of your dreams, and taking small steps like the ones mentioned above can make a meaningful difference in your confidence when the time finally comes for you to retire.

Should you have any questions about your retirement plan, or if you’d like help creating and implementing a retirement plan that you can feel confident with, please contact us today. At TriCapital, our priority is to help you plan a confident financial future.


Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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