Gone are the days when retirement meant the ability to live comfortably off payouts from a pension plan and Social Security benefits. People are living longer, increasing the odds that the average retiree will face significant medical expenses or long-term care. Planning for retirement has become more important than ever.
According to the U.S. Census Bureau, the average length of retirement in the U.S. is 18 years. That’s just the average – meaning that while there is a chance you could die before that, there is just as good a chance that your retirement could last for 30 years or more. While beginning to save for retirement as early as possible is important, simply plowing money into stocks or an IRA may not be the best approach for your individual needs and for the years you will spend in retirement. One of the best things you can do is to engage a qualified financial advisor who can help you put together a realistic picture of your expenses in later years and how much you will need to save to live comfortably throughout your retirement.
Properly planning for retirement means making sure your savings and investing are well-diversified and that the amount of risk within your retirement savings portfolio is correct for your current age and point in your work life. If you are in your 20s and just beginning your work life, you can choose riskier investments that hold the potential of greater payouts — if such investments do not pan out, you still have plenty of years to make up for any losses.
The further along you are in your career and the closer you are to retirement, however, the more important it becomes to balance any risks within your investment portfolio with guaranteed income streams. A financial advisor can help determine how much money you can expect to spend once you are retired and whether you are on track to meet those needs. A financial advisor can also help with estate planning, from advice on whether to take advantage of financial instruments such as trusts, to the best ways to pass on wealth to children and grandchildren.
While hiring a financial advisor may initially mean a sizeable payment to assess your finances and map out your plans, if qualified and experienced, the odds are good that your advisor will generate greater savings that will make that initial investment pay for itself quickly. Once you have mapped out your initial plan with an advisor, you can check in periodically – when you experience significant life events such as marriage, divorce, the birth of a child or anything else that may change your plans. It is important to do homework before hiring an advisor to ensure they have a good background.
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