Retirement Planning

Determining the amount of savings needed for a comfortable and secure retirement is the foundation of retirement planning, upon which the rest of your retirement planning efforts are based. The amount of savings needed varies based on your income, circumstances, and the lifestyle you want to experience in retirement.

Depending on who you ask, you’re likely to hear different strategies for setting your retirement savings goal. For example, some retirement experts recommend saving 10 times your pre-retirement salary, and budgeting to live on 80% of your pre-retirement annual income. Others advise the 4% rule, which divides your desired annual retirement income by 4% to give you the total number you need to save. The 4% rule assumes a 5% return on investments after taxes and inflation, and a 30-year retirement period.

While these general strategies can be great a starting point, they fail to consider other aspects—such as additional income sources (social security, pensions, part-time employment, investments, etc.), health and medical costs, your desired retirement lifestyle, and any other factors which are unique to you. An experienced retirement planning advisor helps you determine a number that’s right for your income, goals and circumstances.

A retirement planning advisor is a financial professional who specializes in helping clients plan for and manage their finances before and during retirement. They help you define, evaluate, and work to achieve your retirement goals. A retirement planning advisor assists with many aspects of retirement planning, from saving and investing to budgeting and spending, to estate planning and long-term care planning. Some retirement planning advisors focus on specific areas, such as tax optimization or investment management. Others take a more comprehensive approach, factoring in your entire financial situation to ensure their advice is integrated with other aspects of your life.

The term “retirement planning advisor” encompasses a wide range of financial professionals with varying experience and designations. Boulay Financial Advisors, LLC is a Registered Investment Advisor (RIA), and our retirement planning team includes advisors who are CERTIFIED FINANCIAL PLANNER™ professionals. These designations indicate specialized expertise and rigorous training (more on this below).

As you work toward retirement, you face complex decisions that will impact your future financial security. A retirement planning advisor offers expert guidance and unbiased advice, to support you and lower the burden of this decision-making. The advisor helps you map out a plan to ensure you have the resources needed to support yourself and your loved ones during retirement. Further benefits of working with an experienced retirement planning advisor are numerous, but may include:

• Peace of mind: A retirement planning advisor develops a relationship with you and understands the overall context of your retirement strategy, which allows them to more effectively guide you through each phase of life as you approach retirement. This provides reassurance that you will be able to support yourself over time.
• Objectivity: Retirement planning is closely tied to your personal goals and dreams, making it easy to get your feelings involved. A retirement planning advisor brings an outside, less emotional perspective, to ensure your retirement plan is strategic, sensible and achievable.
• Convenience: Life gets busy, and retirement planning requires time and expertise. A retirement planning advisor eases the burden by helping you navigate the complex world of securities, insurance and other factors of retirement planning. With the details taken care of, you can focus on saving for—and enjoying—your retirement.
• Tax optimization: A tax-efficient withdrawal strategy is critical to making the most of your assets. A retirement planning advisor helps you plan ahead, so you can avoid unexpected tax shocks and minimize the taxes owed in retirement.

If your retirement planning advisor is a CERTIFIED FINANCIAL PLANNER™ professional, they meet rigorous educational and ethical standards. CFP® professionals act as a fiduciary; this means they are committed to serving their clients’ best interests, at all times, to prepare them for a secure financial future.

Having passed the CFP® Certification Examination, CFP® professionals have undergone significant testing to demonstrate they have the knowledge required to deliver ethical, holistic planning on a variety of retirement planning topics.  In fact, the CFP Board’s website states that Retirement Savings and Income Planning comprise of 18% of the Principal Knowledge Domains and Topics which are included in the curriculum framework for the CFP Board’s education requirement.

With their fiduciary status and educational background, CFP® professionals bring a unique level of trust and expertise to your retirement planning efforts.

It’s no secret that investing is a critical aspect of retirement planning. As you start living off your savings, you need to ensure continued income throughout your retirement; a strong retirement portfolio will help you go the distance.

Investment management is a key part of most retirement planning advisors’ jobs. However, when you work with a professional who is affiliated with a Registered Investment Advisor (RIA), you gain additional transparency and trust. RIAs are firms who are registered with the Securities and Exchange Commission (SEC) or a state-level authority. Though not endorsed by the SEC, these firms must meet initial and ongoing requirements for registration, including disclosure of various information.

An RIA is also a fiduciary, with a duty to act in their clients’ best interest. This is the key difference between RIAs and other types of investment firms. While both offer personalized advice based on your investment objectives, age, life stage and risk tolerance, RIAs are legally obligated to act in their fiduciary role at all times. Thus, many believe RIAs to be more trustworthy and objective in their approach.

Boulay Financial Advisors, LLC is proud to be a Registered Investment Advisor. As part of an RIA, our retirement planning advisors help clients pinpoint strategies or investments that are right for their retirement portfolio. They also provide guidance on how to adjust or rebalance your portfolio as you get closer to retirement.

Start saving as soon as you can—the sooner you begin, the more time your money has to work for you, and the greater the power of compound interest.

If you’re later in your career and still have a way to go, it’s not too late, though, higher savings rates will be required. Your retirement planning advisor can provide workable options to help you get on track to meet your goals and adjust your retirement saving strategy if needed.

The timing of your retirement depends on your personal needs and goals, as well as your financial circumstances. While it may be tempting to retire as soon as you’re eligible to collect retirement benefits such as Social Security, you also want to ensure you don’t have to worry about finances throughout your retirement years.

Factors such as your retirement savings, health benefits, social security, and the lifestyle you desire in retirement must be considered before making the decision. It is important to ensure you have the resources to make the most of this new stage of life. Keep in mind, the earlier you retire, the larger nest egg you’ll need to be comfortable and secure into your golden years.

Retirement income sources can be divided into several categories:

• Guaranteed income (i.e., Social Security, Annuities)
• Pension plans (i.e., defined benefit plans)
• Individual Retirement Accounts (IRAs)
• Retirement savings, including 401(k), 403(b) and 457 plans
• Other nonretirement savings, including brokerage accounts, savings accounts and certificates of deposit (CDs)
• Continued employment

Most retirees’ income will come from a variety of these sources. No matter where your retirement income comes from, a retirement planning advisor can help you make the most of it. Then, when it’s time to withdraw income, the advisor can help you optimize your withdrawal strategy for tax-efficiency.

Longevity risk, or the possibility that you will outlive your retirement assets, is a top concern for many retirees. With increasing life expectancy, longevity is difficult to predict; many retirees underestimate just how long they’ll live. Greater longevity necessitates greater retirement plan payouts, spread over a longer period. This may require you to adjust your retirement budget from your original expectations.

In retirement, your spending will be based on your savings and level of comfort. Putting together a plan and budget before you retire gives you a better idea of the lifestyle you can afford in your golden years. To budget appropriately, it’s valuable to work with an experienced professional. A retirement planning advisor considers factors like your appetite for risk, financial situation and personal circumstances, to put together a plan that will help ensure your funds last. They also factor in their expectations for inflation, market declines, healthcare costs, and more so you can stay on track amid inevitable challenges. A retirement planning advisor cannot predict your longevity, but they can help you best prepare.

Retirement is a time to relax and enjoy, but it can also be a time of uncertainty. Inevitably, you’ll face financial challenges before and during retirement. Some of the most significant financial risks are increased health care costs, market volatility, inflation, longevity risk, and death of a spouse. A retirement planning advisor helps you develop a comprehensive strategy to protect you against such risks and/or minimize their impact.

An Individual Retirement Account (IRA) is a type of tax-advantaged account designed to help you save money for retirement. The tax benefits of an IRA allow your savings to potentially grow, or compound, more efficiently than they would in a taxable account.

The two major types of IRAs are traditional and Roth IRAs. Contributions to a traditional IRA are tax deductible, meaning they reduce taxable income in the year they are made. These contributions grow, deferring taxes until withdrawals from a traditional IRA take place, at which time they are taxable income. In comparison, contributions to a Roth IRA are made with after-tax dollars—they are not tax deductible in the year of the contribution. However, your Roth IRA contributions and earnings grow tax-free, and qualified withdrawals in retirement are tax-free as well.

Depending on your situation, one type of IRA may be more advantageous than another. Connect with a Boulay retirement planning advisor to learn which type of IRA is best suited for your needs.

Boulay’s retirement planning services are tailored to suit individual client needs. In general, however, our retirement planning advisors may assist with the following:

• Transitioning your investment portfolio from a strategy aligned with accumulation to one which supports your retirement income plan
• Performing cash flow analysis to determine the withdrawal percentage of savings each year that will be sustainable throughout your retirement
• Formulating a strategic income plan to optimize the tax burden on savings from different accounts such as 401(k)s, traditional and ROTH IRAs, pensions, annuities, taxable accounts and Social Security benefits
• Recommending risk management strategies that can protect you against the key risks you will face during retirement
• Developing and implementing estate tax planning, gifting and charitable giving strategies

Whether you’re saving for retirement or transitioning your accumulated assets into income, our retirement planning advisors provide tools, resources and strategies that focus on tax efficiency and help you meet your goals.

To get answers to any questions that are not on this list, or to schedule a meeting with an experienced retirement planning advisor, connect with us today.