Broker Check

FEAR LESS: Face Retirement Challenges Head On

by Howard Hook, CFP®, CPA

As published in New York Daily News on April 25, 2014

Question: I am approaching retirement and I’m overwhelmed with everything I need to do. What should I be doing now to best prepare myself?

Answer: The best piece of advice you can give someone who is approaching retirement is to be prepared both financially and emotionally.

Preparing for retirement does not necessarily mean planning out every detail for the next 25 years of your life. Many people feel that they have to do this because the loss of income from a job, mixed with the finality of what comes after retirement, creates a desire to plan out every detail so as not to miss out on any opportunities or avoid pitfalls that may arise.

But doing this only causes more stress because it is impossible to roadmap 25 years of one’s life with any degree of certainty. The easiest way to understand this is to think back 25 years ago and compare where you were then with where you are now. A thoughtful analysis would reveal many twists and turns, most of which could not have been foreseen years ago.

Many times a simple check-up will help prepare you to enter retirement. Determining how much money you will need to replace your lost wages, and where those funds will come from once retired, is a good place to start.

Next, an inventory of all your assets and liabilities can help shed light on whether you have enough assets to supplement your needs in retirement.

Drawing too high a percentage of your investment assets from your portfolio at the beginning of your retirement can result in a declining asset base that could force you to change your lifestyle later on. This becomes more difficult to do as you age.

Finally, a review of the various risk areas that could sidetrack you once you’re retired is crucially important. How will your retirement be impacted by a premature death of one’s spouse? How about the financial effects of a long-term illness where custodial care in addition to medical care is needed?

You should also be considering how much risk are you taking in your investment portfolio by either investing too heavily or not enough in equities.

A certain amount of equities are needed to maintain purchasing power through retirement, but not too much that another major downturn in the stock market would hamper your ability to maintain your lifestyle.

Breaking up your retirement into 10-year time periods can help you answer the above questions without having to put too much guesswork into your analysis.

Those people who still find the above checklist too daunting should seek professional assistance to help them work through these items.

Ignoring them only creates added stress and can lead to bad decisions - two things that no soon-to-be-retired person should have to deal with at a time when they should be enjoying the fruits of their labor.

In summary.....

• Decide what you’ll need in retirement and where funds will come from
• Take inventory of all assets and liabilities to determine financial standing
• Assess impacts of unforeseen events - death of a spouse, illness - on funds