When people first come to our firm, McPherson Financial Group, many have been saving for most of their lives. When we first meet, they commonly ask me, “Will I be able to retire?” Odds are, if you’re saving 10-15% of your income, you will. But most people don't know how to accomplish it.
They have accumulated funds but have no way of knowing what a 401(k) and other accounts mean for income.
Pensions were easy; they were normally a percentage of your salary, and you could easily figure out how much income you would receive when you retired. The biggest decision you had to make was how much to give your spouse or partner if something happened to you: 100%, 75%, 50%, or 0%. Each of those choices would affect your income and how much your spouse or partner would receive.
But a 401(k) is a lump sum of money you’re supposed to invest and live off of.
You need it to keep pace with inflation, provide steady monthly income, and last 30 or more years.
Even though you may not be a financial expert, you are required to make these extremely important financial decisions.
You will no longer have the office co-worker who was the respected source in the office and, over the last 10 years, has been giving you advice.
You will no longer be a part of those once-a-year investment meetings with the 401(k) guy.
Instead, you’re supposed to know how to distribute these retirement funds in the most tax-efficient way and manage more money than you have ever had in your life.
No pressure.
That's probably why you’re scared and reading this article.
Your brain knows you have a problem and is trying to help you solve it!
Congratulations, you’re now on the right path.
I have new clients coming in all the time who want to retire but struggle with knowing whether or not they can.
How much can they take in income from their 401(k) without running out of money?
They see what the websites and online information recommend, but actually putting a plan together, being able to monitor that plan, and knowing if you’re going to be successful are very difficult for the average investor.
At best, the average investor did part-time investment research while working and accumulating funds, but now they have to manage tax brackets and coordinate pension, Social Security, and investment incomes all combined.
The language is difficult, even for our new clients who are some of the brightest and best-educated minds in the country.
We have many doctors, lawyers, and rocket scientists who are extremely successful in their careers but now have to learn the language of the investment world, and it’s quite a different language.
As I write this article, we’re helping to allocate the portfolio of a client family who has over $3,000,000 in equities in almost one stock.
They have been successful and averaged well above the market averages the last 20 years.
You would think they would be very excited, happy, and looking forward to retirement, but they are scared to death. They are scared to wake up one day and have it all be gone.
Do you need that kind of stress in retirement?
Do you want to have to watch your accounts each day, or do you want to travel, play golf, and see your family and friends? How nice it would be to not have that kind of stress.
Don't be afraid to ask for help.
These are your retirement savings. Seek a good advisor who has experience working with people in retirement planning and 10 years or more in the industry.
Diversify and make sure your firm has alternative planning options in your portfolio besides stocks, bonds, and cash.
There are many products and planning models to reduce portfolio risk and volatility that are crucial during the income phase of your nest egg.
Don't wait until the day you retire to seek help. Many times we make decisions because we have a time crunch, urgency, or need, but don't wait. Time and pressure can force you to make hasty decisions you may regret in the future.
If you’re in the Retirement Red Zone, this is the perfect time to seek help with your portfolio. The Retirement Red Zone is the 5 years or less before your expected retirement date.
You can map out a strategy, be aware of the various options available, and know precisely each month if you’re on track for your retirement dreams.
Have a plan and begin to execute it. To retire and play golf five days a week is not a plan; it’s an ideal goal.
A true goal is measurable, has a time frame, is attainable, and can be monitored to see if you’re behind or ahead of schedule.
Good luck, and happy retirement!
