What is your retirement plan?
Picture it big sprawling beach with your toes in the sand. The cook is in the house and the cleaner is making the beds and you are reading a good book without pictures. This is how I picture my life when I retire the problem is how do you get from the dream to the reality? The answer is simple get a financial planner without a good retirement plan you will never reach your dream. I think at this rate we could live the dream above for a year. I am looking for twenty. That means I need a plan.
You will need to meet with a financial planner and bring all the information you have. That means your bank statements, debts, and assets, and dreams. You will want them to do the following things.
Check Your Taxes
Verify that you’ve paid enough into the IRS for income taxes. Now, I’m not a proponent of paying a lot of extra money into the IRS; that’s like loaning them your money without getting any interest. But, unless your expecting your tax return this year to be drastically different than last year’s return, you should have paid in at least as much as you owed last year. You can quickly check this by looking at the YTD amounts on your W-2 and comparing them to the total tax amount on your tax return. You should determine your refund amount if any and try to place it in something that will provide the most return on investment. You need to think about your house on the beach after all that is more important than that amazing dress.
Review Your Retirement Fund
Make plans to contribute to more to your retirement fund than you did last year. If you’ve been doing it all along through your employer-sponsored 401(k) plan, that’s great. If you don’t have access to that kind of luxury, though, you’ll want to put some thought into opening a traditional IRA or Roth IRA for yourself. This is something that a financial planner can help you determine. They have so many tools to enable you to make the right choice for your future. Although you don’t have to make these contributions before the end of the year to take advantage of the tax benefits (you have until April 15th), it’s not a bad idea to start thinking about it now. I say if you are able to cut the expenses you have now and use that money for your future do it! I am on the $5 savings plan and I really like it.
Ponder and Reflect
Take a moment to reflect on the past year. Now is the time to decide what things worked for you and what things didn’t work in terms of your financial tragedy? Did you take a stab at the envelope method or the denial method, but then realize that using nothing but cash didn’t work for you and not owning up to what you bought was worse than knowing? What went wrong? Maybe you can try a modified version of it next year. How did you do with your savings goals? Did you save enough? What things should you planning to save for next year? Congratulate yourself on the things that went well and look for ways to salvage the attempts that didn’t go as smoothly. Either way, you probably learned a lesson or two about your finances. I read an article which advises to set realistic goals when planning for retirement. You need to project your retirement expenses based on your needs, not rules of thumb. It is important to be honest about how you want to live in retirement and how much it will cost. I believe true success if found by having goals and sometimes we need the help of others to meet our goals. A good financial planner and a system can make the difference between having a cook and being the cook.
For my own retirement plan, I found Genworth Financial retirement income worksheet to be very useful in helping me know what I have to pay for the life I want in retirement. It’s a budget calculator that estimates the cash flow to cover my “have-to-haves” and “nice-to haves,” a simple but huge first step in making my dream plan to reality.