Never too late to save for retirement: Local advisors suggest ways to plan

ADDISON COUNTY — Retirement is at once the golden ticket that many people spend several decades of their lives dreaming about, and at the same time is the most intimidating proposition imaginable.
After 40 or 50 years of working hard to earn a living, all of a sudden you are supposed to trust that your savings will in fact support you for the rest of your life as you spend your days doing all of those things you never had time for. And while it always sounded nice to travel the world or snuggle for long days on the couch with nothing to do but enjoy a novel or catch up on the TV series you’ve been hearing about, will you actually be happy filling every day like this?
How do you plan your day when you don’t have work guiding your routine? How will you maintain the relationships that you have formed in your professional life? And perhaps the question at the very top of the list, how should you budget your savings to ensure it will cover you for the rest of your life, so you don’t become a burden on your family?
To help answer some of these financial questions, we turned to some local professionals who specialize in financial consulting for retirement. We gave them each a set of questions, asking how and when to start planning for retirement, and what some of their tips are for staying ahead of the curve.
Here’s what they had to say.
Q: What are the key questions to ask yourself when thinking about retirement?
Don Devost/Marble Trail Advisors: The years just before and after retirement are the most critical financial period in one’s lifetime. Good choices made during this period can set you up for a secure and rewarding retirement. Poor choices can lead to irreparable mistakes that prevent you from living the retirement of your dreams. This is a critical time to seek advice from an objective expert, even if you have never sought out this advice before.
There are some key questions: 1) What will I do with my life after I retire? Ideally, you will want to replace work with activities you enjoy that will motivate you to get up and stay active. 2) How much money will I need to live on once I’m retired? Prepare a budget of how much you think you’ll need each year, factoring in health care costs, long-term care, and estimates of the costs of your goals — travel, supporting grandchildren in college, charitable giving, etc. 3) When should I start collecting Social Security? Most people start drawing Social Security as soon as they are able. More often than not, however, it’s best to wait. Full retirement age is 66 for people retiring today. 4) Where will the rest of the money come from to afford my goals? Some of your income will be fixed — from Social Security, pensions or annuities. A significant amount, either from part-time work or your investments, may be variable. Remember, even the best made plan is subject to surprises; health issues may prevent you from working part-time or deplete your savings faster than expected.
Jacob Haigh/Community Investment Counselors: Do I want to do this on my own or do I want to involve someone who helps people do this every day? What lifestyle or spending level do I want to have upon retirement? Do I want a new car every five years or a second home or to eat out three times per week? Do I want to work part-time in “retirement” or stop working altogether? How much income-tax flexibility am I creating for myself at retirement? What are my options for Social Security filing? Are my investments in a good position to meet my financial targets?
Shawn Oxford/Bristol Financial: Here are a few places to start: What does retirement look like for you? Will you retire completely or will you work part time? At what age do you want to retire? Will you have enough to live on in retirement for 25-30 years? Many are now living longer so longevity has to be factored in.
Malissa Marshall/Marble Trail Advisors: The decision to retire is not just a financial one, but an emotional one, as well. Some people don’t want to give up their work, so they plan to pare back their hours instead, for as long as they can, rather than retiring altogether.
1) What are my goals, dreams and priorities after I retire? 2) How much money will I need to live on once I’m retired? Use financial planning software to model out the probability that you can meet all these goals during your lifetime; if not, you will need to make choices (as most of us do). One of the key questions for your financial assets is how much of an investment return you need to make, which is closely tied to how much risk you can afford to take on (and still sleep at night). Using planning software can help you determine how much risk you may need to accept to meet your goals, or modify them if needed.
Question: When is the best time to start planning for retirement? What is too early/too late?
Malissa Marshall: It is never too early — even minors can plan for retirement. As soon as you start working (including a summer paper route), you can start contributing to an Individual Retirement Account, or IRA. Nor is it ever too late — we work with many clients already in retirement who still need help with planning: making sure they have proper diversification in their portfolios; choosing the best, low cost options; taking tax-efficient distributions from their retirement accounts; planning for long-term care, a move to a retirement facility, etc.
Shawn Oxford:  The best time to start planning was yesterday. The earlier you start the easier it will be to make retirement decisions in the future because you want to rather than because you have to. 30-40 years of compounding is better than 10-20 years. However, with that said it is never too late to start.
Don Devost: It’s admittedly difficult to motivate someone in their 20s to think seriously about retirement. What’s most important — at any age — is to start saving. Due to the awesome power of compound interest, living below your means and generating investable wealth at a young age can have a profound impact on your financial security later in life. Whether you are at a point in life where you have clarity into when you will retire, whether you will have children, or if you’ll go back to school, having savings and building wealth opens up a world of possibilities. As your nest egg grows, then start thinking more carefully about what your money is for and how best to save for your various goals.
If, on the other hand, you’re like most folks who didn’t start saving seriously before your 40s, then the answer is clear, you need to start planning for retirement NOW.
Question: On average, how much money should you plan on needing for retirement?
Don Devost: Unfortunately, no one is average when it comes to retirement, and most people don’t want to set what’s average as a goal. A great many people live only on their Social Security checks. Some are even happy. Most of us set our sights a bit higher. Financial institutions put out a lot of ads aimed at convincing you there’s a “number” they can figure out for you that will take care of all your worries. Most of their approaches are based on simplistic rules of thumb that may work in some situations, but can be disastrous in others.
The best course of action is to have a long-term financial plan that articulates how much you will spend and where that money will come from, and then review and revise that plan regularly, at least on an annual basis.
Jacob Haigh: Who needs more money at retirement: a person who just wants to keep the lights on throughout their life or someone who would also like to be charitable and take three cruises each year? This rhetorical inquiry nudges us toward a proper mindset about our own retirement needs and points out the error of sound bites such as “On average you need 80 percent of your pre-retirement income to retire.” Averages don’t represent ANY individual’s unique life, goals, or resources. The amount that you “need” depends on your vision of retirement and how you perceive needs vs. wants. It may seem counterintuitive, but the best way to direct your saving and investing decisions today is to work backwards from a realistic retirement “end-goal” that you create.
Malissa Marshall: This is a very individual decision, based on one’s unique circumstances. You should take a look not only at what income sources you’ll have (Social Security, company pension, annuity, inheritance, etc.), but also at the expenses you’ll incur (annual living expenses, medical, long-term care, travel, other goals, car purchases, legacy for children, etc.). There are other factors, as well, such as how long you expect to live, and how much risk you can take on (which may limit the amount of return you may receive from your investments, and therefore require more savings).
Shawn Oxford:  Most folks can retire and maintain a familiar lifestyle with approximately 70-80 percent of their pre- retirement income. This is considering lifestyle preference and assumptions such as many of the big liabilities being paid for pre-retirement. i.e. mortgage, college bills for kids etc. However healthcare and longevity tend to be the factors that influence retirement the most. Long-term care considerations and estate planning can help plan for this.
Question: How do you recommend retirement planning differently when you’re addressing people of different ages?
Malissa Marshall: When you’re younger (20s-30s), you may need to pay off student loans and/or save to purchase your first home, which affects the amount you can save toward your retirement. When you are older (40s-50s), you may be faced with finding a balance between funding college and retirement at the same time. Even when you are in retirement, you could be faced with supporting elderly parents, or struggling children, as well as yourself. At every stage, there are always trade-offs to be made, based on your individual priorities, since the vast majority of us do not have the financial resources to “have it all.”
Jacob Haigh: We don’t like to generalize, but to simplify, put yourself into 1 of 3 categories: Accumulator, Pre-Retiree or Retiree. Accumulators often have minimal retirement savings and have many non-retirement goals competing for their incomes such as debt repayment, college savings for children, and/or home purchases to name a few. To prioritize we focus these clients on the tradeoffs between their goals and discuss the best “types” of accounts and investments to be utilizing. For example, the unique tax characteristics of a Roth IRA account are often advantageous and volatile financial markets could actually be your best friend as an Accumulator. Retirees are the opposite in many ways, and are often more focused on preserving the wealth they have accumulated and strategizing how to best “spend” the investments they have. They should be thinking about trying to mitigate the negative effects of market downturns, distributing their assets to themselves in a “tax-efficient” manner, and determining sustainable withdrawal rates each year. For Pre-Retirees retirement is becoming a closer reality and meaningful assets should have accumulated. The best advice for them is to be taking a serious look at the “how much do I need” question by refining their retirement spending vision and determining where they stand.
Don Devost: Over the course of your lifetime, the nature of your “capital” changes. Early in your career, when you have many working years remaining and an ability to learn and apply a vast array of knowledge, you are rich in human capital, but poor in financial capital. So you should be thinking about translating your human capital into financial capital. Think about how well your career and its earnings potential aligns with your goals and, if necessary, adjust.
In mid-career you are still rich in human capital — you have less runway ahead but probably acquired some skills along the way — and you have the ability, hopefully, to start thinking more about how much longer you want to work and what kind of retirement you want. If you are still light on financial capital, you still have time to catch up.
If you’re still working into your 60s it’s time to start thinking specifically about what the future will hold and realistically about how much longer you can work and what sort of lifestyle you can afford once you retire.
Shawn Oxford:  In your 20s and 30s, you should start saving for retirement — preferably using tax-advantaged retirement accounts that let you direct money into equities. Through equity investing, your money may grow and compound profoundly with time — and you have time on your side. You may be married and started a family around this point, and if so spending has probably increased quite a bit from when you were single. As you save and invest in pursuit of long-range financial objectives, remember also to play a little defense. Create a will and identify a financial power of attorney in case something unforeseen happens.
In your 40s and 50s, you might feel “sandwiched” between taking care of your kids and your elderly parents or relatives. Your spending may reach a new peak, but hopefully your salary is rising as well. Do your best to maintain your retirement planning efforts through this time in the face of the other financial stresses. Try hard not to dip into retirement savings to pay for other things like college tuition, regardless of how onerous the loans may seem.
Once you reach your mid-50s through your 60s, you are in the “red zone” before retirement. Do your best to accelerate your retirement contributions and make safe financial choices that minimize risk in your portfolio as retirement nears. Work to reduce or eliminate all outstanding debts before retirement so you are not faced with that stress in retirement.
Question: What (or who) are some of the best resources for those who are starting to plan for retirement?
Jacob Haigh: A great starting point is to ask family, friends or neighbors what financial planners they trust or have had success with and then interview a few of them to determine who you have a good rapport with. This should be a cost-free consultation. Focus on “Investment Advisors” who get paid a fee for financial advice rather than the financial transactions that they make for you.
Malissa Marshall: We recommend speaking with an advisor who is a fiduciary — someone who is obligated to put your interests first — rather than someone who is incentivized to sell you a particular product. Of course, there are many books, magazines and websites that you can also use to better educate yourself on some of the considerations that go into creating a viable plan (such as investments, insurance, and estate planning), but know that such advice is not tailored to your specific circumstances.
Shawn Oxford:  Retirement for most is a life-changing event and one that many avoid discussing. Meeting with a trusted professional can help ease folks concerns with whether one is on track to meet ones retirement goals. Often individuals are not sure with the types of questions and concerns they should have when considering retirement.
Don Devost: Speaking with someone you know who has been recently retired — and seemingly happy with how things are going — is an easy way to gain some insights into what’s involved.
Question: Just because a person “can” retire, should they?
Shawn Oxford:  This is such an individual decision. If you enjoy what you do and you want to continue, why retire? Perhaps retirement is not working 40 hours a week, but it is working 10-15 hours at a more leisurely pace. On the other hand others may have had family health issues, and decide that they just can’t wait and want to retire at the earliest possible opportunity.
Malissa Marshall: We believe in developing plans that are flexible and therefore can adapt as circumstances and goals change. Planning is not a one-time event which results in a final, bound document for your bookshelf, but rather should be considered as an ongoing, at least annual process of revisiting where are, and what you would like to achieve. Scaling back on work hours, rather than outright retirement, can also make the transition easier, and provide both additional financial resources early in retirement, as well as a chance to experience some of the benefits of having more free time to pursue other goals.
Don Devost: People should first think about how they want to live and then consider how they will afford to live that way. Putting off retirement as long as possible doesn’t make sense for someone who’s financially secure and has other activities they’d enjoy doing more. Many retirees don’t realize they already have the financial resources they need to enjoy life the way they want. 

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