Are you retirement ready?

I often get asked “When should I start planning for retirement?”.?While most of the time the answer is – as soon as possible, I believe the real question is “How do I move from accumulation phase (growing my retirement nest egg) to distribution phase (getting a paycheck from my retirement savings)?”.?That process should typically start about five years before you intend to quit working. ?Below are three steps that can help smooth the transition into retirement.

1. Pay down high interest debt – Review your liabilities to determine which are charging you the highest interest rate.?Then if that interest rate is higher than your expected return on your portfolio, focus on paying this debt off before you retire. While the dream is to retire debt free, it may not be realistic for everyone. A reasonable goal is to have most of your high interest debt (normally any personal, unsecured debt) paid off and to stop accumulating any additional debt in that category.
2. Set up your bucket strategy - Ideally, a portion of your portfolio would contain assets equal to at least 2 years of your income needs. These funds would be in cash, money markets, and possibly short-term government bonds or other insured products – this is your “cash” bucket.?This approach can help deal with the possibility that the market will decline in the critical early retirement years, resulting in lower or negative returns, that can greatly affect your ability to maintain a sustainable income stream for life.
3. Consider rebalancing based on your goals – Evaluating your income sources well before retirement provides you time to make any required adjustments to your plan. If most of your income is going to come from your retirement savings, you may need a different mix of investments to achieve that goal vs. the asset allocation you were using to grow the portfolio while working. Partner with a financial planner to determine what kind of balanced portfolio of stocks, bonds, mutual funds, and other assets will meet your risk appetite and time horizon for making withdrawals.

You can finalize the specifics for cash flow generation from your investments when you are less than a year away from retiring. ?With careful preparation, you should have a solid plan to generate an income to support you through at least three decades of retirement. ??

Once you are fully retired, your main objective should be taking pleasure in the results of your labor rather than worrying about money. Making all the moves to ensure a consistent and sustainable retirement income requires a lot of work, but that work doesn't have to get in the way of your day-to-day activities.?If you feel like you don’t have a clear plan and a good working relationship with a financial planner, please reach out. It is never too late to create a comprehensive strategy to help you and your family achieve your goals.