Key Points – 7 Reasons Why Retirement Planning Is Important
Yes, Saving for Retirement Is Imperative, But There’s More to Why Retirement Planning Is Important Than Saving
Your Retirement Goals Need to Be Top of Mind While Planning for Retirement
Understanding How Your Retirement Is Unique to You
Having a Financial Plan Truly Shows Why Retirement Planning Is Important
12 Minutes to Read
There’s More to Why Retirement Planning Is Important Than Just Saving
OK, you’re growing your retirement nest egg by you’re diligently saving for your financial future. Isn’t that your retirement plan? What else could you possibly need to account for in your plans to retire? Our goal is to help people prepare for and succeed in retirement. Whatever that looks like for you, we want to help get you there. The most important factor in navigating a successful retirement is having a retirement plan. Why is retirement planning so important you may ask? Because at end of the day, it’s not all about saving – it’s about much, much more.
So, let’s go through a quick list of seven reasons why retirement planning is important so you can make sure you’re not missing something crucial on your way to a successful retirement.
Knowing You Can Achieve Your Goals
Spend Less on Taxes Over a Lifetime
Maximize Your Retirement Income
Combat Inflation in All Directions
Manage Your Risk
Family and Philanthropy
Clarity, Confidence, and Control
1. Knowing You Can Achieve Your Goals
We all have goals for life. For many of us those are career goals or family goals, but what about goals for when you’re retired? While some of you may have your dreams for retirement determined, others may have no idea what you will want to do with your years of rest and relaxation.
So, why is knowing you can achieve your goals a reason why retirement planning is important? Well, if you’re working with a financial professional like a CFP® Professional, they can help you determine your probability of achieving your goals in retirement with the resources available to you. If you want to learn more about how that probability is determined, check out our article, What Is a Monte Carlo Simulation?
The idea is that if you map your goals out for retirement, your financial professional should be able to help you determine that probability of success given your desired retirement date. Maybe you’ll need to work a few more years to achieve those goals in a probability that makes you more comfortable. Maybe you’re already there and you don’t even know it!
The point is, without setting goals for retirement and understanding your probability of success in achieving those goals, you’re really going into retirement blind. And for many pre-retirees and retirees, the risk of running out of money in retirement is a major worry. Knowing you’re able to achieve your goals can provide you with peace of mind as you venture into retirement. That is why knowing you can achieve your goals in retirement is a reason why retirement planning is so important.
7 Reasons Why Retirement Planning Is Important
on America’s Wealth Management Show
2. Spend Less on Taxes Over a Lifetime
In a couple of months, all Americans will feel the same impact on their accounts – the impact of Uncle Sam. Every April, we get our favorite American holiday, Tax Day. Obviously, we say this with tongue-in-cheek because we know it’s one of the most dreaded annual deadlines for most U.S. households. So, why pay more tax than you need to, especially when you get into retirement and likely have a more fixed income? Let’s look at why retirement planning is an important factor in lowering your tax burden over your lifetime.
That’s the reason why tax planning is important in the retirement planning process. It allows you to keep more of your hard-earned dollars rather than sending them off to the government.
3. Maximize Your Retirement Income
Going into retirement can be a scary situation when you know you’re no longer getting a regular paycheck. Instead, you’re relying on the savings you were able to sock away while you worked and the gains those savings can earn you while you’re no longer working. So, how do you make sure you don’t run out of money in retirement? How do you ensure you have enough income to live the life you want to live in retirement?
We’ve covered one way with establishing a tax plan alongside your retirement plan. Are there more ways to ensure your covered for your retirement years? Ensuring you have enough income is retirement is incredibly important to your plan. It’s the fuel for your retirement!
Get the Most You Can from Social Security
We are all familiar with one source or retirement income, Social Security. While Social Security is a great source of income in retirement, it’s usually not enough alone to achieve one’s goals. However, many people also only take Social Security at face value, claiming it as soon as they reach an age they can claim.
Oftentimes, the first thing prospective clients ask when we meet is how they should be investing. While investing is an important part of retirement planning, it’s not why we plan for retirement. We plan for retirement for the first item on this list – achieving your goals.
Investing is very important in the overall picture of your retirement plan. Obviously, we need to make sure you’re generating enough additional income in retirement to cover your expenses. By developing a retirement plan, your investments become a piece in the overarching puzzle rather than the focus of your retirement plan.
Outside of health care expenses, the cost of education has skyrocketed in the last 30 years. Looking at Figure 1 below, you can see that the average cost of education has over doubled for a private four-year school since 2000. For a public four-year school, it’s nearly tripled.