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Retirement Planning

Common risks in retirement

There are several risks you are likely face in retirement .It is better to understand and identify those potential risks in your plan and its consequence. It is better to have strategies to avoid or mitigate each risk to improve your plan’s probability of success.

Longevity

Longevity risk is the most notable of retirement risks; the risk of living past your life expectancy and not having sufficient resources to maintain your lifestyle. With increasing advancement of medical care life expectancy are expected to go 75.2 by 2040 (source prb.org).When combined with the life expectancy of a spouse; there is a possibility that anyone living far behind the life expectancy.

The best strategy to address longevity is to plan for it. Invest to protect as well as grow your retirement nest egg, establish and maintain appropriate withdrawals and monitor your plan regularly with MAC .We also help you with strategy to leave assets to your legal heirs if you desire.

Inflation

Inflation risk represents how purchasing power is eroded over time. Retirees are especially susceptible to this type of risk because their sources of incomes are primarily fixed. Statistics have shown that two major components of a retiree’s expenses — housing and medical care — increase at a rate higher than food and other inflation. Retirees must remain mindful of the long-term effects of inflation, and work with MAC to address this issue. Equities have been proven to be an effective hedge against inflation. But everyone would not be comfortable with market risk. Income risk is closely related to market risk and is defined as unexpected reductions in income (interest and/or dividends) due to changes in the interest rate environment or the performance of the stocks in a portfolio. Asset allocation strategies that strive for total return can help manage, but not eliminate, income fluctuations. Your plan should identify the amount of investment income that is required to maintain your standard of living and appropriate investments should be chosen to help meet that needs. In some cases it is also important to consider increase in standard of living.

Income Tax law changes

Public policy risk addresses governmental or legislative changes that can affect your retirement income; most notably taxation. Discuss tax strategies with your MAC Financial planners regularly and consider employing a “tax diversification” strategy with your retirement assets. It is important that you review your plan regularly to stay abreast of changes in tax laws. Your living expenses in retirement are partially controllable, but some expenses, such as health care, may be beyond your control.

Cost of Healthcare

Health care costs continue to be a force to reckon with, a factor compounded by our longer life spans. Talk to you planner ensure you have adequate health cover and also ensure you are protected for the outpatient expenses.

Life event Changes

Lastly, life event risk represents changes in your life, such as the death of a spouse that threaten your financial security. Your plan should include a survivor needs analysis and address how assets are titled. All estate documents and beneficiary designations should be reviewed on a regular basis. Retirement, like every other stage of your life, is full of risks. More importantly if your income is not sufficient to take care till your life expectancy discuss with MAC Financial planners for reverse mortgage or other avenues to meet your requirement.

Retirement stages

In Retirement Now

  • Inform beneficiaries of legal (will, settlements etc) or financial records, PIN numbers, passwords and other information. Keep them all in safe custody or a locker fully protected.
  • Discard all irrelevant old documents to keep them out of the wrong hands.
  • Verify all your accounts by looking through the statements you receive, both on paper and online.
  • Register for online accounts and automate transactions whenever you can.

Maximize your savings

  • Become aware of any changes in tax laws ? they may affect your portfolio if, for example, capital gains rates rise or fall.
  • Make sure you have a three to six month cash reserve to meet emergencies.
  • Determine an appropriate withdrawal rate in consultation with MAC Financial planners.
  • If you need additional income or a shortfall in income you may consider working in retirement.

Manage your investments

  • Review your risk tolerance and asset allocation continuously.
  • Adjust your portfolio to ensure that it's well diversified.
  • Contact MAC Financial planners to help you with your investments.
  • Make sure your beneficiary benefits areas per your wishes.

Near Retirement

  • Inform beneficiaries of legal (will, settlements etc) or financial records, PIN numbers, passwords and other information. Keep them all in safe custody or a locker fully protected.
  • Discard all irrelevant old documents to keep them out of the wrong hands .
  • Verify all your accounts by looking through the statements you receive, both on paper and online.
  • Register for online accounts and automate transactions whenever you can.

Maximize savings

  • If you're age 50 or older, make catch-up contributions to applicable accounts.
  • Set up automatic contributions to your retirement plans.
  • Review your savings plan with MAC.
  • Make sure you have a three to six month cash reserve to meet emergencies

Managing investments

  • Review your risk tolerance and asset allocation.
  • Adjust your portfolio to ensure that it's well diversified.
  • Discuss a retirement income strategy with MAC Financial planners, including a withdrawal plan.
  • If you have company stock in your plan, determine if there are tax benefits available to you if you plan your distributions appropriately

Define your expectations

  • Begin to think about when you can officially retire.
  • Write down your goals for retirement and review with MAC Financial Planners.
  • Talk to your spouse or family members about how you might handle unexpected events.
  • Think about family obligations and take into account that you may support aging parents or adult children.
  • Start to think about health insurance. Find out if your company provides any coverage, and if they don't, look into Medicare.
  • If you under EPS find out your distribution options from your employer.
  • Project your retirement expenses to determine whether your retirement income will cover them.

Far from Retirement

  • Track down all your accounts by looking through the statements you receive, both on paper and online.
  • Register for online accounts and automate transactions whenever you can.
  • Review your retirement balances and accounts to consolidate some of them.

Maximize Savings

  • Contribute as much as you can and as often as possible.
  • When you get a pay raise, increase the contribution to your accounts before you get used to the extra money.
  • Set up automatic contributions to your retirement plans.
  • Make sure you have a three to six month cash reserve to meet emergencies.
  • Track your expenses for one or two months to determine what your daily expenses are ? then figure out where you can save more.

Manage investments

  • Assess your risk tolerance and asset allocation.
  • Don't be tempted to pull out of the market.
  • Make sure your investments are diversified, especially if your employer plan includes company stock.

Contact MAC Financial planners to review your investment plan.