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If only there was a way to predict the future. It would be helpful for quite a few things, especially retirement planning.
Figuring out how much money you’ll need to live the life you want — for the entirety of your retirement — is one of adulthood’s biggest challenges. And managing the possibility that you won’t outlive your savings has a name: longevity risk. No matter what, proactive financial planning is necessary to give you the greatest chance for success.
As you plan and set goals for the year ahead, now is a good time to think about longevity risk and develop strategies to ensure your retirement funds last as long as you do. After all, what good is a nest egg if it runs out early? And on the flip side, what good are hard-earned savings if you don’t spend them out of fear of running out?
Better planning for better outcomes
Over the past few decades, there has been a shift from traditional pension plans, where you get a defined monetary benefit in retirement, to 401(k)s and other defined contribution retirement plans, which puts more responsibility and stress on the shoulders of individuals to contribute a large portion toward their retirement savings. Fortunately, you don’t need an MBA to know that better planning leads to better outcomes; so here are three ideas to build a retirement plan that you feel confident in and have the resiliency to follow.
Planning idea No. 1: Lifestyle is important. So is keeping options open.
If you’re like most people, you have ideas about what you want to do in retirement, like owning a second home, traveling or volunteering in your community. Your plan should have the flexibility to balance your desired lifestyle with what you can afford. To do this, trade-offs such as delaying retirement, part-time work or waiting to collect social security all may need to be on the table as you’re planning.
Planning idea No. 2: Knowledge is power
A lack of preparedness can lead to undesirable spending cuts, but you can guard against this by getting educated about available solutions.
One of the biggest steps you can take to increase your income and ensure that it will last your lifetime is waiting to claim social security. Simply delaying your claim from age 67 to 70 results in a nearly 25% increase in payments, and that larger payment will grow with cost-of-living adjustments.
Another is insured products. For many, protected savings and lifetime income options limit risk and insulate assets from the effects of market volatility — all while generating predictable income streams for fixed expenses in retirement. Such products are available from Prudential and can help improve retirement security for a lifetime. But they’re not for every person or every situation, so discuss the possibilities with a financial advisor. Which leads us to the final planning idea…
Planning idea No. 3: Don’t go it alone
If you are open to getting help, but don’t know where to start, there are many tools and resources to help you plan, with a trusted financial advisor being at the top of the list. Advisors will likely start the conversation by asking about your current financial situation and desired outcomes. If you’re clear on those outcomes, it will be easier to make choices from the range of options and strategies.
And if you’re not quite ready to meet in person with an advisor, there are online tools to help. The web-based Prudential Stages for Retirement will unlock your personalized Retirement Confidence Score and generate custom projections of your retirement income and spending over time. When you’re ready to kick things up a notch, you can connect virtually or in person with a financial advisor to help you define, refine and realize your financial goals.
Remember: There is no time like the present
As we dive into a new year, now is the ideal time to think about building a plan to reach your goals. Every day counts, so get started today and good luck on your financial planning journey — you’ve got this!
This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients.
The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional.
Annuities are issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates.
Prudential Stages is an umbrella marketing name for Pruco Securities LLC (sometimes referred to as “Pruco”) under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate agreement. Investment advisory products and services are made available through Pruco, a registered investment advisor.
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