3 resolutions that will enrich your retirement

I became a financial advisor because I hated seeing people who’d followed the rules – saved money in a 401(k), put their kids through college, gave to charity – only to reach retirement and find they didn’t have enough to sustain them for more than a few years. It’s not enough to have a certain amount of money in your portfolio, you want to have a guaranteed check coming in in addition to your investments.

Whether you’re years from retirement or planning for it now, these three resolutions will help you prepare fully for financial freedom in the golden years:

1. Resolve to plan for expenses in retirement to equal or exceed your expenses today. Many people assume their expenses will decline once they retire – they forget that they’re going to have a lot more free time to do what they love. What are your dreams? Will you want to travel? Take up a new hobby? Meet friends for golf two or three times a week? Those likely are going to be expenses you don’t have now. Also, once you retire, things don’t magically last forever. The rug in the dining room, the fridge in the kitchen – eventually they’ll need to be replaced or repaired. Medical expenses will either appear or increase. Sit down and think about what your ideal retirement looks like, and presume that it will be for at least 30 years. Make a list and take a guess at what those activities cost – even if your retirement is years away. How much money will you need coming in each month or year?
2. Resolve to get most of your investments out of tax-deferred plans. If you’re working for a company that provides a match for 401(k) contributions, by all means, contribute up to the maximum match. That’s free money – you’d be crazy not to take advantage. But investments that can be more strategic in terms of taxes should also be considered: Roth IRA, municipal bonds, life insurance or real estate. No one expects taxes will go down – they’ll be going up. Uncle Sam already has a lien on your IRA or 401(k); don’t let his lien, or the taxes you’ll owe, continue to grow. Go ahead and pay now, and your future retired self will be glad you did.
3. Resolve to have a portfolio that generates a steady or guaranteed paycheck. The ideal financial security for retirement is having a guaranteed income that increases with inflation. I suggest planning for an income that meets or exceeds your annual income now so, for example, if you’ll be getting $1,000 a month from Social Security at age 62 and your current income is $4,000 a month, you need to have a plan to guarantee $3,000 a month to cover that gap. Annuities and life insurance are investments that may provide an income you cannot outlive, so consider them for at least part of your portfolio. You don’t want them to make up 100 percent of your portfolio, but they should provide the foundation.

It’s important to start thinking now about where you want to be in retirement and what combination of investments will ensure you have the lifestyle you want for as long as you live.

At 65, you don’t want to be making risky investments because you’re panicking about not having enough money. Now is the time to plan.