If you still haven’t made resolutions for 2019, it’s not too late – especially when those resolutions involve your retirement.
Because when it comes to having enough money to survive – let alone flourish – during retirement, plenty of Americans are coming up short. For example, fewer than half of retirees – just 46 percent – agree that their retirement nest egg is large enough, according to a new survey by the nonprofit Transamerica Center for Retirement Studies.
At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
As a result, too many people end up struggling when they should be enjoying the later years of their lives, says Andrew McNair, founder and president of SWAN Capital.
“It’s not enough to have a certain amount of money in your portfolio,” McNair says. “You want to have a guaranteed check coming in in addition to your investments.”
As 2019 begins to unfold, McNair suggests you make and follow through on these three financial resolutions:
- Resolve to plan for expenses in retirement to equal or exceed your expenses today. Many people assume their expenses will decline once they retire, but they forget they will have more free time to do what they love, McNair says. “Will you want to travel? Meet friends for golf two or three times a week?” he asks. “Those likely are going to be expenses you don’t have now.” Also, as you age, medical expenses can eat into your savings. “Sit down and think about what your ideal retirement looks like, and presume that it will be for at least 30 years,” McNair says. “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?”
- Resolve to get most of your investments out of tax-deferred plans. If you’re working for a company that provides a match for 401k contributions, by all means, contribute up to the maximum match. “That’s free money – you’d be crazy not to take advantage of it,” McNair says. But anything beyond that should be invested in something that’s more tax efficient: a Roth IRA, municipal bonds, life insurance or real estate. If, for example, you shift money from a traditional IRA or 401(k) into a Roth IRA, you would pay the taxes now, but avoid them once you start drawing the money in retirement.
- 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. “You want to plan for an income that meets or exceeds your annual income now,” McNair says. “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 a plan that provides $3,000 a month to cover that gap.” Annuities and life insurance are the only investments that provide a guaranteed income you cannot outlive, he says, so consider them for at least part of your portfolio.
“Figuring out the best way to make your savings stretch over the next 25 to 30 years can not only be confusing, it can also be overwhelming,” McNair says. “But it doesn’t have to be that way. With the right planning and the help of a financial professional, you should be able to protect your financial assets while making the lifestyle you desire possible in retirement.”
About Andrew McNair
Andrew McNair is the president of SWAN Capital, an independent financial services firm in Pensacola, Florida. He has experience in the fields of retirement income, wealth preservation, and long-term care and has a strategic partnership with an attorney for estate planning services. McNair also is the author of Tithe: A Living Testimony and Don’t Be Penny Wise & Dollar Foolish. His financial commentary has appeared in the Wall Street Journal, Forbes, Fox Business, Market Watch and Kiplinger.