3 Steps to Building A Sound Retirement Plan
11 December 2017
Working every day on a farm, with an early wake-up call and long hours, doesn't leave a lot of time for planning. But it is difficult to predict in the farming industry what future years will bring. With weather extremes becoming the norm, it seems, farmers and ranchers find themselves planning for a variety of scenarios year after year. Of course, these factors affect personal finances as well. Thus, the ability to project into the future may be crucial to making long-term financial goals more achievable, according to studies.
In fact, researchers at Stanford University reported in the Journal of Marketing Research that people who took the time to imagine themselves as retirees reported that they would save twice as much as those who didn't.
It makes sense. In order to save enough for a financially secure retirement, you first need to know what you want your retirement to look like. It is only then 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.
Visualizing Your Goals
The process of wealth accumulation involves a consistent plan of saving and investing to help you build financial security for the future. How do you know how much savings you will need? The answer depends on the lifestyle you hope to have in retirement. Will you continue to live on the farm or ranch? Do you see yourself still working part-time while and after transitioning the day-to-day field work to future generations? The clearer the picture, the easier it will be for you to quantify what you'll need to make your goals a reality.
Step 1: Protect Assets by Managing Retirement Risks
As you think about your retirement goals, it's crucial to also understand and manage six key risks that can impact your financial security in retirement - those that go beyond crop yields and weather patterns!
These financial risks include -
· Longevity risk and the very real possibility that your retirement income may need to last three or more decades once you stop working.
· Market risk and the chance that a market downtown could significantly impact the amount of money you may have to live on in the future.
· Inflation and tax risk, and how both can take a significant bite out of your budget.
· Health care risk and the damaging effect rapidly increasing medical costs may have on your financial security.
· Long-term care risk and the possibility that you may require unexpected care in the future - that's not covered by Medicare.
· Legacy, risk and the need to balance your desire to provide for your heirs and the financial security of your farming or ranching business.
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 income in retirement. An important part of this involves turning all or part of your accumulated assets into a steady, predictable stream of income that can meet your needs, and the needs of your spouse and other family members, throughout your entire lifetime.
A prudent distribution plan doesn't rest on one scenario, however. It considers the possibility that the economy, the markets and/or your needs may change over time. It factors in all your sources of retirement income, such as Social Security, pensions and any other retirement plans you may have. It provides a strategy to you prioritize and manage your retirement distribution and rollover options so that you can maximize the potential of both your tax-deferred and taxable accounts. And finally, it considers various planning solution, such as income annuities, that are specifically designed to provide a foundation of retirement security by providing 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 to give the family growing or ranching operation a sound financial foundation is an important part of their vision for retirement.
Even if you don't consider yourself wealthy, a well-thought-out plan can help you maintain your lifestyle in retirement while ensuring that your assets go to the people and places you want, when you want.
Don't Go it Alone
Financial security in retirement is something you can achieve with confidence when you start with a clear vision of what you want in the future and put in place the right combination of tailored solutions to address key risks and optimize income.
This is where professional guidance can make a difference. A qualified financial representative can assess your individual circumstances and develop a customized plan designed to generate a lifetime income that can help bring your vision of retirement to life.
Read more about Financial/Markets.
Article prepared by Christi Kaiser. Christi Kaiser is a Financial Representative with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries. Christi Kaiser is based in Louisville, Ky. To contact Christi Kaiser, please call (502) 562-2400 or email at firstname.lastname@example.org.
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