Retirement Planning By way of a Strategic Wealth Management Process

 

Lots of people feel that they want to enjoy life to the fullest. I don't disagree, but is it necessary to spend virtually descobrir cpf pelo nome every dollar you earn, immediately in exactly the same month, to enjoy life to the fullest?

The main basis for individuals to fail in achieving their retirement goal is having less financial discipline in delaying gratification. Delay gratification is an essential virtue.

 

Your income is for the enjoyment of one's lifestyle and life purpose, it has no other function. The important question is WHEN? Just how many percentages of one's take-home pay should really be put aside designed for the objective of your retirement?

 

So just how much have you been willing to put aside each month for your retirement plan? Could it be consistent with just how much you need to put aside?

 

Step 2 - Goal Setting

 

A) When do you want to retire? Are you experiencing definite/mandatory retirement age that your company imposes? Check that along with your HR department. Or you really wish to prevent just work at a younger age, for whatever reasons?

 

B) At what lifestyle? Review your present expenses and try to find out how they will change at retirement. Two major assumptions could be whether your mortgage could be fully paid off at that time and whether your young ones could be fully independent by then.

 

Step 3 - Take stock of your present financial position

 

So how exactly does your present balance sheet looks? What are your assets, which are specifically earmarked for retirement, vs other objectives like investing in a car, holiday or children education? Are you currently finding a fair return with the risk you are taking, for every of one's existing investments? Think about your liabilities, how soon can you pay them off?

 

Any way to save interest cost on your existing liability?

 

Saving on interest income, through mortgage refinancing. If you have a considerable outstanding mortgage of $500k or even more, and annual interest of 3.5% or even more, you are able to potentially save over $10,000 interest in the initial year alone, through refinancing of your house mortgage.

 

Step 4 - Understand your Risk Profile

 

This is actually the step that many people (including many financial advisers), started using it wrong.

 

It's far more then just investing centered on the risk profile, ie. if you have the low risk tolerance, purchase low-risk products, if you have the high risk tolerance, purchase high-risk products. That's everything you hear all of the time.

This is one of the very trickiest areas that lots of people make a mistake. Again, there is a problem in both overexposures and underexposure to risk. Many people understand the issue of overexposure to risk, but how about underexposure?

 

The reluctance to take any risk, e.g. see any short-term loss in capital, will result in a reduction in long term growth in capital, directly impacting on the viability of one's retirement goal. How exactly to balance both is both a skill and a science.

 

First, you need to set a realistic expectation on the rate of return. Then, you'll need to create an efficient portfolio that's consistent with your required long term rate of return, investment horizon, at the same time taking your risk tolerance into consideration.

 

Your risk profile should take the next 3 aspects into consideration:

 

1) You need to take a risk that will be determined by your required rate of return. 2) Your power to take the risk, that will be determined by factors like investment horizon, your present financial situation, job stability, liability level, adequacy of insurance coverage, dependency, etc. 3) Your propensity for risk.

 

Step 5 - Gap Analysis

 

After a full review of one's existing financial situation, and your retirement goal, it's time to complete a different analysis.

 

If you are unsuccessful, it's crucial that you know how much is reality deviating from your own goal, and make plans to boost and/or accept the harsh reality.

 

Which includes ensuring that you're able and willing to work past your ideal retirement age, or live with a considerable drop in post-retirement lifestyle. Knowing the unpleasant reality and making mental, physical and financial preparation ahead of time is a great help, then last minute surprises and shocks.

 

It can be important to find out whether you have other lump sum needs, near retirement?

 

Step 6 - Do not forget your Insurance

 

Retirement planning is not merely about investment and making your hard earned money grow. It can be about protecting your hard earned money, to make sure they are there to fund your lifestyle. Without proper protection, your retirement fund might be properly used to fund the doctor's retirement lifestyle (no insult to doctor, really).

 

The protection which is critical to guard your retirement funds are:

 

Medical insurance, that is critical, especially at old age. And you need to get it now, not when you're 60 years old, because odds are that you may not be insurable at that time, because of ill health like high blood pressure, that will be very common these days.

 

Critical illness insurance, to supply lump sum payout to cover another outpatient medical cost that's not covered by normal medical insurance, and also other of alternative treatment and some lifestyle adjustment cost.

 

Long Term Care. CPF Elder shield is this kind of plan, but at the $400/month benefit, it's unlikely to be enough for some people.

 

It is therefore crucial that you have a good review of one's existing insurance plan and see whether they will work very well for you through your retirement.

 

Step 7 (last step): Review your plan yearly or as needed

 

A yearly review is essential to take care of changes change in:

 

1) Your goal 2) Your current financial situation 3) Investment return and portfolio management

 

Your financial adviser is especially responsible to offer proper financial advice and develop the strategy. But obviously, you should be usually the one to take active interest and ownership in ensuring that your plan is likely to be successful, by doing review yearly.