Like most people, you may find it difficult to predict what you’ll be doing a year from now, let alone decades. However, researchers at Stanford University reported in the Journal of Marketing Research (Volume XLVIII, November 2011) that people who take time to imagine themselves as retirees tend to save twice as much as those who don’t.
It is only in that way that you can create a plan that takes into account the three essential components of a sound retirement plan: protecting your assets by managing the risks of retirement, creating income that lasts your lifetime and planning your legacy.
VISUALIZE YOUR GOALS
Start by imagining life once you stop working. The clearer the picture, the easier it may be for you to make your goals a reality.
A well-thought-out plan can help you maintain your lifestyle even as you leave a legacy.
Step 1: Protect assets by managing retirement risks.
As you think about your retirement goals, remember that it’s crucial to also understand and manage five key risks that can impact your financial security in retirement. These risks include:
- Longevity risk—the possibility that your retirement income may need to last decades
- Market risk—the chance that a market downturn could impact fund availability
Inflation and tax risk
- Healthcare—the damaging effect medical costs may have financially
- Legacy risk—the need to balance your desire to provide for your heirs
Step 2: Create income that lasts a lifetime.
Once you have taken steps to manage against the risks in retirement, you will want to take steps to optimize your retirement income.
A prudent distribution plan considers the possibility that the economy and/or your needs may change. It factors in all your sources of retirement income and helps prioritize future distributions. It considers various planning solutions, such as income annuities, which are designed to provide a guaranteed income for life.
Step 3: Plan for future generations.
For many people, creating a legacy to benefit loved ones, future generations and/or a charitable organization is a vision for retirement.
A well-thought-out plan can help you maintain your lifestyle even as you leave a legacy. In many cases, permanent life insurance, which provides the ability to build cash value over time, can be an important estate-planning tool to help meet your future cash needs and protect your heirs.
DON’T GO IT ALONE
Financial security in retirement is something you can achieve with confidence when you start with a clear vision and put in place the right combination of tailored solutions.
Professional guidance can make a difference. Qualified financial advisors can assess your individual circumstances, developing a customized plan designed to generate a lifetime income that can help bring your vision of retirement to life.
D&P Financial Advisors is a marketing name for Douglas J. DiCerbo & James N. Pettorelli in their capacity as representatives of Northwestern Mutual and is not a legal business name. Article prepared by Northwestern Mutual with the cooperation of Douglas J. DiCerbo and James N. Pettorelli. Douglas and James are Wealth Management Advisors with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wis., and its subsidiaries. Douglas and James are based in Boston, Mass. To contact Douglas or James, please call 617.531.9525, email firstname.lastname@example.org or email@example.com, or visit their websites www.dougdicerbo.com or www.jamespettorelli.com.
This article was originally published in the October/November 2016 issue of Worth.