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1-2-1 January 2022 Thumbnail

1-2-1 January 2022

1-2-1 Retirement: The Long-Term Outlook and Reinforcing Habits That Work

Happy One 2 One Day!

Here is 1 tip, 2 quotes, and 1 habit to consider this month.

For our first 1-2-1 of the new year we wanted to give you a deeper dive into the topic of retirement than our usual simple tip. Please share feedback if you like this format more or less than the tips we share. Thank you.

1 Tip: A Long-Term Outlook

You put in the work so you can look forward to a fun, relaxing, and fulfilling retirement. How can you be assured your retirement dreams will come to fruition? Here are a few things to keep in mind. 

Your Time Horizon

The time horizon for retirement has changed. People are living longer, which is a great thing for you and your family. More than three out of five 65-year-olds will reach the age of 80. The average retirement currently sits at just under 20 years and it's only expected to increase as time goes on. Generally, planning your retirement funds is usually in the 20 - 30 year timeframe. 

Determine your Spending Needs

Most people believe their annual spending will amount to only 70% to 80% of what they spent previously. Perhaps you have paid off your mortgage, have less debt, and income from other sources, such as stocks, bonds, and real estate. 

A more realistic outlook is to assume spending in your retirement is closer to 80% to 100% of your normal spending. New expenses such as emergencies and medical bills may surface. With inflation and unforeseen costs, it is better to prepare to keep your income level steady and look for ways to reduce expenses. 

Monthly Income + A Bonus

Your main goal in retirement should be for your money to last. Think about your retirement funds in two categories: your monthly paycheck and an annual bonus. 

Your monthly spending is acquired from retirement funds, such as your pension, social security, 401(k)s, 403(b)s, or IRAs. Think of this monthly spending as your regular paycheck. Your monthly bonus, on the other hand, can be money earned from investing or real estate. You can also think of this monthly bonus as your “Life Happens Fund,” for extra expenses. Investments of all kinds can produce either an income stream or a lump sum, but they can't do both. Be sure to keep them straight and plan your incoming cash flow according to how you plan to spend it.

Manage Your Expenses

If you determine that your expenses exceed your spending, you can fill that gap in a variety of ways. You can increase your income or reduce expenses, or do a combination of the two. Expenses may be where you have the most control. 

You may want to consider working part-time. Think about your knowledge and interests, and do something you enjoy. It could be a welcome opportunity to get out of the house and interact with others in your community while earning a little extra money. 

More Time Equals Great Rewards

Longer retirement years equal an opportunity for great rewards. You can always expect a certain level of volatility with the stock market but when done right, the odds of growing your investments over time are in your favor. 

A goal-based, customized approach to investing will ensure that your portfolio matches your expenses and needs. Cooler heads will prevail. Stay the course, and you will have a better long-term outcome. 

As always, I am just a phone call away to address any concerns.

2 Quotes From Others:

"Retirement is a blank sheet of paper. It is a chance to redesign your life into something new and different." – Patrick Foley

"Optimism is unfashionable today, particularly among intellectuals. Everyone makes fun of it." Someone said, "Pessimists got that way by financing optimists." But I am not pessimistic and I advise you not to be. - John W. Gardner

1 Habit: Reinforce The Financial Habits That Are Working For You

If you were to take a moment to think about the financial habits that serve you well, what comes to mind? Reinforce the habits that keep you out of debt, that build savings, and that help you invest. 

You can also work toward eliminating those habits that don't serve to improve your financial life. Overspending, credit card balances, low credit scores, stagnant investment growth, not saving enough, and unrealistic expectations are a few examples of areas that can be improved.

Remember this: no matter what financial habit you decide to keep or get rid of, all that matters is that you get started.