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Making the Transition to Retirement: Will You Be Ready to Retire?

Think about how long you have been saving for retirement. Using savings accounts, brokerage accounts, 401(k)’s, IRA’s and anything in between, you’ve formed a strategy around building a retirement savings plan to provide you with income after your last paycheck. Now that you’re thinking about retiring in the next 5-10 years, it’s time to formulate a new strategy. This strategy will position your savings for optimal income throughout your retirement years.

Where to begin furthering your retirement plan? First, consult with a retirement income planning specialist before making any changes to your existing plans or portfolios. When you meet with them, make sure to understand their perspective on four important factors.

1. Retirement Risk: Sequence of Returns

When planning to live off of the income and capital of your investments, the sequence of investment returns could impact your portfolio’s value over time. The timing of withdrawals made on certain investments early on could mean lower returns than you may have expected, which is critical in determining how long your assets actually last.

To protect yourself from sequence risk before you retire, having a disciplined investment process in place is essential. Considerations include supplementing the retirement portfolio with investments products that provide guaranteed income (i.e. immediate annuity, deferred income annuity, etc.), or building a laddered bond portfolio. The best thing you can do is to understand that all choices involve a tradeoff between risk and return.

2. Retirement Market Risk Management 

Market risk, also called “systematic risk,” is the ever-present risk of investment losses based on performance of the financial markets. Market risk can never be eliminated since it is influenced by uncontrollable stimuli, like recessions, natural disasters, terrorist attacks, interest rate changes or political turmoil.

To hedge against market risk, your retirement portfolio should be a diversified mixture of investments that reflect your personal risk tolerance. Build a portfolio of investments throughout multiple industries to diversify your portfolio. Most importantly, your diversification strategy should align with your long-term goals for retirement.

3. Retirement Income Considerations

Making the transition from earning a regular paycheck to sustainability in retirement presents a crossroads in your financial life. Financial planning and budgeting for this transition should be approached thoughtfully and strategically. It’s important to develop a plan that considers your short-term income and financial needs, but also projects ahead to cover you for the unknowns of the future.

Let your Retirement Income Planning Specialist guide you through your current spending habits at a weekly or bi-weekly basis. Evaluate your short-term, intermediate and long-term income considerations to prepare to transition to your retirement income. Use C&N’s Retirement Savings Duration calculator to see how long your current retirement savings will last.

4. Managing Income Sources During Retirement

Mapping out a plan for managing multiple income sources will also ensure you’re optimizing your income potential during retirement. Your strategy will need to cover income generated from your social security benefits, pensions, employer-sponsored 401(k)s or individual retirement accounts, investments in stocks or bonds, and more. In conjunction with managing those income streams, there are differing tax implications associated with each that will be important to thoroughly understand.

It is common to become overwhelmed as you approach this phase of life. But it doesn’t have to feel that way. If you start planning 5-10 years before you retire, you can put measures in place that will set you up to reach your retirement goals. In addition, partnering with a trusted Retirement Income Planning Specialist will also provide you with a reliable resource for knowledge, guidance and support. Discover our Retirement Nest Egg calculator or connect with our retirement specialists to further your financial future.

Some products are not FDIC insured or guaranteed, not a deposit or other obligation of the bank, not guaranteed by the bank and are subject to investment risk, including the possible loss of the principal amount invested and are not insured by any other federal government agency.