Laura McHugh, Spinnaker Trust
July 9, 2024
How To
Set yourself up for retirement success
By Laura McHugh, Spinnaker Trust
It can be stressful to consider your financial future, especially if retirement is on the near horizon. So many unsettling questions loom. Luckily there are some smart steps you can take that will help you establish a strong foundation for retirement no matter what unfolds.
1. Consider the big picture
Sit down with your financial advisor to walk through a goals-based plan to think about how you want to live in retirement — what you’ll need, what you want, and whether you’ll be able to afford that round-the-world trip you’ve been dreaming about. Consider your entire portfolio of assets, not just the amount of money in your retirement accounts, but all sources of income including Social Security, pensions, part-time work etc. An advisor can help you get clarity on how much income you’ll have and what expenses you’ll need to plan for, like health care and personal living expenses plus the reality of unplanned expenses like ongoing home maintenance that never seems to end. You may need to keep an open mind about your retirement date. In many cases, working even part time for a few years beyond 65 while contributing to a 401(k), can make a huge difference in how well you’re positioned.
2. Rethink your asset allocation
Many assume that assets should be invested in a 60/40 split, with 60% of money invested in equities to maximize appreciation, and 40% of money invested in bonds, to provide steady income and mitigate risk. That may apply to your particular situation, but it’s important to drill down and make sure that your assets are allocated in a way that syncs up to your retirement timeline. For example, IRAs can be left more aggressive since you may have a longer time horizon to use them than the personal account you intend to use early in retirement. If you’re retiring next year, you don’t want to have to worry about what’s going to happen in the equities market in 2025. You want to make sure that the money you’ll need over the next five years is coming from reliable sources of income, complemented by a bond ladder.
3. Streamline your assets
If you’ve had five different employers over the course of your career, you’ve likely had five different retirement plans, which means you’ll have five different Required Minimum Distributions, or RMDs. It also means you probably have five different usernames and passwords to keep track of, and possibly five different sets of management fees. That can be a headache. Consider streamlining your accounts. Being able to log into one account and see your entire portfolio of investments can offer a clearer perspective on your financial position.
4. Don’t just set it and forget it
Your employer might sponsor a retirement plan or an IRA to help you save for retirement, but it is not your employer’s job to invest your money so that it’s optimized for your hoped-for retirement timeline or to knock off those bucket-list dreams. Too many people let years go by without looking at their accounts. Take a more active interest and role in managing your portfolio. Regardless of where your assets are managed, there is likely someone you can call and talk with to ensure that your assets are allocated in a way that will help you achieve your goals.
5. Don’t go it alone
It can be tempting to take a DIY approach to retirement planning, but it’s not a good idea. Work with a financial advisor who can take a 30,000-foot view of your finances, and understands how trends, taxes, and policy changes, can impact your position. While many people are reluctant to pay an advisor, the forced checkups can ultimately earn you way more than the fee for services.
Laura K. McHugh, CFP, is a senior vice president and client advisor with Spinnaker Trust in Portland.
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