You’ve probably read countless articles on retirement and the steps you should take to ensure you’re well-prepared for your financial future. To keep you on the right path, here are some potential issues you need to correct before retirement.
Is Your Portfolio Too Conservative?
As you near retirement, you might opt to move more of your assets into conservative investments that minimize market risk. It’s understandable to want to protect your principal, but the low rate of return that accompanies these safe havens may be outpaced by inflation. Keeping too many of your assets parked for too long in overly conservative funds could erode the buying power of your money. Diversify your portfolio to include investment options that have historically performed well against inflation.
Managing Your Tax Burden In Retirement
If you’re contributing to a Traditional TSP, all of the funds being deposited are pre-tax. That means they are not included in the amount of income you pay taxes on now, but they will be subject to taxation upon withdrawal. When you estimate how much you need to pull monthly for retirement income, make sure you account for the taxes that will be due. Try to determine your future tax bracket and take steps to minimize your burden. Consider investing in post-tax vehicles such as a Roth TSP or converting some assets while the tax levels are still advantageous.
“Make sure to establish an emergency fund so that any unforeseen events don’t make a lasting negative impact on your future plans.”
Plan For The Rainy Days
What do you want your retirement to look like? The answer to that question is different for everyone, but when you have an idea of how you want to spend your golden years, you can estimate how much you’ll need to make it a reality. Not only do you need to be prepared for the highs of your post-career life, but you need to have plans for the lows, too. Rising costs of health care and long-term care can take a significant portion of your savings, and in the event of unexpected loss or illness, you’ll want to ensure that your loved ones are taken care of.
Stick To Your Plan
If you’ve successfully crafted your retirement blueprint, and are building your investment strategy around it, any changes could be costly and impact the timeframe for meeting your goals. A big purchase or unnecessary expenditure might trigger a snowball effect that could lead to diminished value in your retirement accounts. Make sure to establish an emergency fund so that any unforeseen events don’t make a lasting negative impact on your future plans.
When in doubt – reach out. An FRC® trained advisor can provide invaluable tools and insights to help you reach your retirement goals.
