Start Your 10 Year Retirement Financial Planning Now: Top 3 Things to Consider

Are you planning to retire in 10 years? Well, October is Financial Planning Month, the perfect time to take control of your financial future. A solid 10 year retirement plan can make all the difference. In this guide, you’ll learn how to assess your financial health, set clear retirement goals, and consider different variables such as determining retirement age and dealing with healthcare costs.

Be sure to calculate your retirement score today with the Institute of Financial Wellness (IFW) and find out how likely you are to achieve income goals in retirement.

Key Takeaways

• Evaluate your current financial situation, including net worth and estimated income needs.
• Define your retirement goals by envisioning your desired lifestyle & setting a target retirement age.
• Regularly review and adjust your financial plan to adapt to different variables, such as healthcare costs.

First, Evaluate Your Current Financial Situation

Now, this may seem like a rather intuitive first step, but you’d be shocked by how many people skip this aspect of retirement planning. Many people jump to where they want to be without first evaluating where they are. So, let’s get into it.

The basics:

• What are your income streams?
• What are your expenses?
• What are your assets?

This is the quickest and most effect way to understand your financial status in real-time.

Start by analyzing your financial baseline, which includes your income & expenses/debts. This snapshot will help you identify what you have and what you owe.

Next, you need to calculate your net worth, involving listing all assets, such as your home, car, investments, and savings accounts. Then subtract your liabilities like mortgages, loans, and credit card debts. The simple equation is as follows:

Net Worth = Assets – Liabilities

How does retirement play into this equation?

Well, estimate your income needs in retirement by considering factors like savings, retirement accounts, debts, and investments. This understanding helps create a realistic and achievable set of financial goals.

Once again, understanding your current financial situation is a must if you ever want to reach your ideal financial situation!

Let’s review the top 3 things to consider and factor into your equation for a successful retirement.

1. Retirement Goals

Once again, this first consideration may seem stupidly obvious, but just as in the section before, most people are not clear enough in their goals or skip outlining them all together.

With a now clear understanding of your financial situation, define your retirement goals and be specific!

Imagine the lifestyle you desire post-retirement, whether it’s extensive travel, upgrading your home, or pursuing new hobbies.

Identify both financial and non-financial goals. Consider where you want to live, the activities you want to engage in, and the living conditions you aspire to. Establishing a timeline helps prioritize financial strategies and a savings plans. For instance, if you plan to retire at 65, you might want to start saving more aggressively now.

Now, if there’s one message to take to heart in this article, it’s this: Your retirement plan must be flexible and adaptable. Life throws curveballs, and the economy can be just as unpredictable. By keeping your retirement plan fluid, you’re not just protecting your future, you’re empowering yourself to adjust and thrive without sacrificing the security of your nest egg.

2. Retirement Age

Factor number two to consider, determining the right retirement age.

While you may be thinking that this is a rather simple consideration and you already have your answer, this is a real delicate balancing act, and it’s important to weight all your options and understand that it’ll be different for everyone.

For example, Monica’s retirement plan aims for age 62, while Steve plans to retire at 65. Knowing your target retirement date shapes how long you have to grow your retirement savings and retirement accounts.

If you plan to retire early, like Monica, you’ll need a bigger retirement nest egg to cover those non-working years, of course. On the other hand, delaying retirement, like Steve, allows more time for catch-up contributions and larger Social Security benefits.

You can begin claiming social security at age 62, but waiting until 70 can maximize your monthly benefit. There’s no financial advantage to delaying beyond that.

Another factor is life expectancy.

Your ideal retirement age should balance the size of your retirement funds with how long you actually expect your retirement lifestyle to last–a no brainer here, but nonetheless needs mentioning. To improve your odds here, it’s best to eliminate high-interest debt and control expenses before you reach your retirement date.

The message that will continue to repeat throughout this article (as was noted before), whether you’re planning to rely on workplace retirement plans, 401(k) accounts, or private insurance, creating a flexible financial plan is key to achieving a secure and fulfilling retirement.

3. Healthcare Costs

Lastly, one must seriously consider healthcare costs as they will only skyrocket with age.

Healthcare costs can significantly impact your retirement budget. Here is a common example, a couple retiring at age 65 in 2023 may incur healthcare costs exceeding $200,000 throughout retirement, underscoring the need for careful planning.

While $200,000 may seem like an exorbitant amount, the average retiree can expect to spend an average of $157,000 in healthcare and medical expenses. Thus, healthcare costs are an essential variable to consider in your retirement plan ahead.

Also, medicare typically only covers about two-thirds of retirees’ medical expenses, leaving significant out-of-pocket costs. Long-term care insurance should also be considered as nearly 70% of individuals aged 65 today will require some form of long-term care. Private in-home care or nursing home costs can average over $100,000 annually.

As proven above, planning for healthcare costs, including premiums, copays, and long-term care, is essential to ensure your retirement fund lasts.

Regularly Review and Update Your Plan

Please do note, retirement planning is an ongoing process, not a one-time task. Annual reviews of your strategy help keep it relevant with current ongoings. Here are a few things to look out for:

• Regularly review your investment performances to ensure that your portfolio continues to meet your retirement goals.
• Adjust contributions to retirement accounts based on changing financial situations.
• Periodically check beneficiary designations to make sure they reflect your current wishes and life circumstances.

Overall, normally update your retirement plan to stay on track and make necessary adjustments as life unfolds.

Your retirement goals should also include strategies to manage pre-retirement income, current expenses, and even long-term care costs.

Utilizing tools like a retirement calculator or consulting a tax professional can help you optimize retirement contributions and ensure your wealth management strategy aligns with your financial needs.

Consult with a Financial Advisor

This may seem a little overwhelming – don’t worry, you’re not the only one!

The average working adult isn’t thinking about life 20-30 years from now so it can seem rather daunting, but you don’t have to face these pivotal life moments on your own.

Working with a financial advisor or certified financial planner like the ones at the Institute of Financial Wellness, can help you create a comprehensive 10-year retirement plan that accounts for your retirement income, investment advice, asset allocation, and more. Planning ahead for health care expenses—like using a health savings account for qualified medical expenses—can make a significant difference in your personal finance strategy.

Financial advisors can also save you time as they will be responsible for continuously monitoring your investment portfolio and adjusting it as needed. If your financial matters are complex, such as having multiple income streams or significant assets, hiring an advisor is especially beneficial.

A financial advisor will also identify investment opportunities that align with your goals. They can even provide emotional support during market downturns, helping you avoid impulsive financial decisions. Choosing a fee-only fiduciary advisor ensures the advice is in your best interest without conflicts of interest.

Having someone to turn to for questions and guidance regarding retirement planning is extremely valuable and can be the difference between a fruitful or unfruitful retirement.

Summary

As we’ve discussed throughout this article, effective retirement planning involves various considerations, such as outlining your retirement goals, determining your ideal retirement age, and taking into account healthcare costs.

Consulting with a financial advisor can provide valuable guidance in understanding your financial baseline, as well as support in your retirement planning and investment strategy. Remember, retirement planning is not a one-time event but a continuous effort to ensure peace of mind.

Do not let fear or hesitation keep your from thinking about and planning what will be a very important and prominent time in your life. Take control of your financial future today, and enjoy the fruits of your labor in the years to come!

Frequently Asked Questions

What is the first step in retirement planning?

Evaluating your current financial situation, including your savings and debts, is the essential first step in retirement planning. This will set a solid foundation for your future security and success!

How can I maximize my Social Security benefits?

To maximize your Social Security benefits, consider delaying your claim until age 70, as this can lead to a significantly larger monthly payout. Taking this step can make a substantial difference in your retirement income!

What if I have a financial shortfall?

If you face a financial shortfall, take charge by boosting your savings, eliminating high-interest debt, and trimming unnecessary expenses. You have the power to turn things around!

How often should I review my retirement plan?

Reviewing your retirement plan annually is essential to keep it aligned with your changing circumstances and goals. This proactive approach helps you stay on track for a secure future!

Why should I consult with a financial advisor?

Consulting with a financial advisor is essential for gaining expert guidance and discovering investment opportunities that align with your goals. Their support can also be invaluable during challenging market conditions, helping you stay focused and confident in your financial journey.