Advisors may have a blind spot when it comes to the distribution phase of their client’s financial lives.
Ideally, retirement planning should begin in your 20s, but it doesn’t end when one retires. Most advisors and their clients spend a great deal of time building a retirement accumulation strategy such as accumulating assets, investing them, cutting expenses and taxes, and building a large retirement nest egg. Even though an accumulation strategy is a necessary component to a rewarding retirement, it is just as important to build a retirement distribution strategy.
Many advisors and their clients neglect this part once they reach retirement. During retirement, it is not only about maximizing risk adjusted returns; it is about meeting spending goals over an uncertain lifetime. Creating an effective distribution strategy will guide you to a stress-free retirement.
The decisions you make as you enter retirement are key and can make or break your retirement success for three reasons:
- You no longer will have earned income and the safety of getting a paycheck every couple of weeks deposited into your checking account.
- You will have several decades where your portfolio and income sources need to pay your bills and sustain your lifestyle.
- You may no longer have the luxury of adding funds such as payroll deductions in a retirement plan. Instead, income will be withdrawn with a greater element of risk and loss in a volatile market.
With life expectancy on the rise, the average person will need their wealth to last longer than those in previous generations. Currently, the baby boomers are retiring at a rate of approximately 10,000 a day (Investopedia) thus requiring a need for more preparation to make sure people live comfortably through retirement and with the possibility of leaving behind the legacy they want. Unlike most advisors, RZ Wealth focuses on pre and post retirement planning. We understand how critical it is to build and strengthen our knowledge on retirement income planning, leveraging that knowledge and resources to the benefit of our clients.
Stay tuned for next week's blog post on how to create an effective retirement distribution strategy.