Many people underestimate how much money they will need to maintain their lifestyle in their retirement years. Factors such as inflation, a diminishing Social Security system and rising costs of healthcare can all quickly erode our hard-earned savings. With life expectancies increasing, many people spend up to one-third of their lifespan in retirement. This is why its essential for you take the necessary steps to prepare for these years, and put your investments to work to account for them. Actively planning for your retirement may be one of the most important choices you'll ever make, and its never too soon to start, or too late to make adjustments. Our Process at Fortress Financial Strategies uses state of the art retirement planning tools to custom design strategies to accomplish our mission of Building and Protecting Your Financial Independence.
While retirement may seem like its years away, taking advantage of investment opportunities early on in your career could make a substantial difference in how much you accumulate. As you get older, the number of options available to you will decrease. A solid retirement plan will help make sure you capitalize on what is available to you. For example, in your earlier years, you may wish to take on a higher level of risk with your investments, while you still have time to make up for market downturns. In fact, early in your career, the biggest investment risk is not being invested at all. As you get closer to retirement, however, you'll want to select investments with lower risks.
"...early in your career, the biggest investment risk is not being invested at all."
Most people underestimate how far traditional sources of retirement income will take them. Over the years, the amount of Social Security paid out to retirees has steadily decreased. Depending on this income as a means to support a lifestyle is not an option for most. Social Security funds should be considered a supplement to retirement income, not a mainstay.
Similarly, while it's essential to take advantage of company-sponsored, tax-advantaged retirement plans, such as 401ks and SEPs, these plans alone still may not be enough. Understanding how your plan works and making sure it's properly invested is an important start. Yet most people will need to supplement these plans with additional investment strategies to make up the difference between what these plans account for and what they'll really need in retirement. At Fortress Financial Strategies, we'd like to help you determine what additional steps are right for you.
There are many advantages to installing retirement plans for your business. Not only will you be saving for your retirement but you will have the ability to defer taxes through tax-advantaged retirement plans. This alone may give you the ability to Retire or achieve Financial Independence years earlier by simply not losing money each year to taxes. Next, as a business owner you can help your employees start the process of saving for retirement. As an added benefit you may be able to lure the talent that you may need to take your business to new heights. Also, as your company becomes more profitable you can install a discretionary profit sharing plan that will allow you to retain key employees and pay less in taxes for your business. Even if you don't have employees and own a small business these types of plans can still provide a great way to save for retirement and pay less in taxes. Tax law changes in recent years have allowed small business owners to establish Solo 401(k)'s that allow you to set up a plan for as few as one person. These changes allowed small business owners the ability to save far more on a tax deferred basis than older plans like SEP's, Simple's, and KEOGH's. Another benefit provided by these more modern plans such as Solo 401(k)'s, Profit Sharing, and Defined Benefit Plans is that federal government ERISA laws provide Asset Protection against lawsuits and bankruptcy.
While a comfortable retirement is an attainable goal, it does require some in-depth strategic planning, which includes some well thought out lifecycle management. During different stages in your life, it will be important for you to invest different amounts of income into different types of investments in order to make the most of what is available to you. Proper asset allocation - the concept of diversifying your investments between an appropriate mix of stocks, bonds and cash - will play an important role in this task.
Early in your career you have the most powerful advantage on your side: time. While it may seem early to set aside money in your 20's and 30's for retirement, this is when the power of compounding interest can benefit you the most. Investing even a small amount regularly can accumulate into quite a large sum.
As you move into your 30's and 40's and are more likely to be a higher earner, you'll want to start socking away a higher percentage of your earnings. At this time in your life, we'll also help you assess an appropriate balance of how much you should be putting away for retirement versus how much you should be putting away for other important needs, such as home buying or your children's education.
Even if you've missed investing in your earlier years, there are ways to help make up the difference, even into your 50's and 60's.While you'll want to take on less investment risk with your money during these years, building or fine-tuning your retirement plan is critical at this point in your lifecycle. This is the time when its most important to realistically assess your retirement goals and whether you've planned appropriately to meet them.
Once you've finally reached retirement, it's important to make sure your money not only lasts, but also continues working for you. Contrary to what most people believe, your retirement plan doesn't end when you start retirement. As your financial consultant, we'll help you determine which parts of your plan should be spent first, and how to allocate the remainder of your dollars.
Taking a realistic look at what you will need throughout your retirement years is an important first exercise that we at Fortress Financial Strategies can help you to project. While retirement may seem like a long way away, the earlier you start, the easier it'll be to get there. Only you can make the decision to be prepared for your retirement, Fortress Financial Strategies can help you Build, Protect, and stay on track with a plan to maintain Financial Independence. Let us help you on your way to a comfortable retirement.
Give us a call to set up an appointment at our office in Glendale, Arizona at 623-255-5180.
It's never too soon to start preparing for retirement. But do you know what to look out for? Download our free ebook, "Retire Happy: A Simple Guide to Your Next Big Adventure."