A new year means new hopes, dreams and goals.
Now that we’re 10 days away from 2022, how are your New Year’s resolutions doing? Dust off the old treadmill and work out for 30 minutes a day? Were you able to resist the leftover holiday cookies and chocolates? Are you eating more fruits and vegetables and less pizza and burgers? Are you spending less time on your phone mindlessly scrolling through apps? Have you finally cleaned up your basement and donated items you haven’t used in a decade?
I ask these questions because exercising, eating healthier, spending less time on electronics, and getting organized are always top New Years Resolutions every year. But we all know most resolutions fail in February. Why? In short, it’s because of a lack of a proper plan and little to no accountability.
While these are all great aspirations to have, I’d like to focus on one resolution that is often missed: investment goals for retirement. I know it’s not the most exciting topic in the world, but the difference between a solid plan and disorganization could have a significant impact on your retirement date, lifestyle, and legacy.
It’s easy to do and stay on track, but it takes a lot of upfront work. The first step is much like cleaning your garage. Take it all out, sweep the floor, and determine what items you would like to keep, sell, give away, or throw away. Likewise with your investments, gather all your recent statements and put them on your kitchen table. Sit down with your spouse and figure out exactly what you own, why you own it, and the overall purpose of each investment.
Next, assess your current expectations, concerns, and lifestyle. An example of waiting is the estimate of retirement expenses. Concerns include the cost of health care, market volatility and parents in need of care. Each topic deserves a conversation and an assessment of its impact on your retirement plan.
A lifestyle assessment involves determining when you want to retire, how much monthly income you need, and how long you expect to live. The United States Social Security Administration has a life expectancy calculator on their website that can show you the average number of additional years a person can expect to live, based on gender and date. of birth. This website also contains a few calculators to quickly determine your estimated income and benefits.
Finally, the fun part begins with a brainstorming exercise on all the needs, wants and wants you desire in a perfect retreat. Some examples include a new home, a vacation, a new car, health care, donations, helping aging parents, helping children and grandchildren in school, and home improvements. Each of them has a different importance level and estimated date. Write a rough timeline for each item, the dollar amount, and rank them from 1 to 10 with 1-3 a wish, 4-7 a wish, and 8-10 a need.
Now that you have a good idea of what your retirement will look like, let’s go back to your financial statements and take a closer look at each investment and whether they match your goals, your risk tolerance, your cash flow needs, and your overall plan. There are also several rudimentary online resources for this, but I encourage you to work with a financial advisor who has the tools and experience to guide you on a financial roadmap and hold you accountable for meeting this resolution indefinitely.
Ryan Diepstra is Director and Chief Operating Officer at Centennial Securities. He can be contacted at firstname.lastname@example.org or (616) 942-7680.