When it comes to retirement planning, determining what retirement looks like to you is a key ingredient. However, many people focus on simply saving as much as possible without putting a lot of serious work into determining what they want to do with that savings. Why should you spend time deciding what you want to do during retirement? Here are three important reasons.
1. You Might Be Saving Too Little
No matter how large or small your retirement nest egg is, the biggest fear for most people is outliving their money. Only through a reasonably accurate analysis of future expenses can you decide if you are saving sufficiently to avoid this.
Even high net worth individuals should work on a tentative retirement budget. Because they have more to work with, someone with higher assets might feel that they can do whatever they want in retirement and end up accidentally overspending.
2. You Might Be Saving Too Much
There is such a thing as saving too much for retirement as well. Most retirement planning comes with the expectation that you will have zero earned income and live solely off passive returns. However, what if your idea of retirement is to do some consulting in your industry? In this example, you may need much less passive retirement income.
Without accurate planning, you could be putting money toward a future goal when it could be better used for other goals — such as enjoying your free time now, paying off debt, supporting family members, or giving to charitable causes.
3. Your Goals Might Have Changed
Over the years, everyone's version of retirement changes little by little. A younger person might see themselves traveling the world after leaving their career — but as they have kids and grandkids, they might find themselves more interested in spending time with the family. On the other hand, someone who's gone through a divorce might be freer to take that trip of a lifetime.
Every five to ten years, each saver should sit down and analyze how their vision of retirement might have changed. Write down things you want to do and things that interest you less. This list will help you and your financial planner readjust your saving, risk, and investments to align with that more accurate picture.
Where to Start
The best, most accurate way to plan for retirement needs is to work with an experienced financial planner who specializes in wealth management. Together, you can decide what retirement really looks like for you and how you can fund it properly without sacrificing your present needs too. Make an appointment with a wealth management professional to get started.