9 things to consider in the retirement red zone
If you’re a football fan, you’re already familiar with the term “red zone.” When one team gets the ball inside the opposing team’s 20-yard line, they’re in the red zone. Here, a team’s strengths and weaknesses are on full display — and strategy is everything. The entire game has built up to this moment.
In the world of retirement planning, the concept isn’t all that different.
At Elevage Partners, we like to think of the years leading up to your retirement date as the “retirement red zone.” Here, the far-off concept of retirement is close to becoming a reality.
As you consider your retirement plan, let’s break down some important plays to help you reach your goals and avoid fumbling the ball.
Determine Your Income Needs
The first few years of retirement have the potential to be some of the most expensive because it can take time to adjust to your new lifestyle and living on a fixed income. Consider breaking down your current and future expenses, making sure to include things like hobbies, possible home improvement projects and vacations you’d like to take. If charitable giving is a regular part of your family’s plan, factor donations into your income needs as well.
Plan for Health Care
Of all the expenses associated with retirement, health-related expenses can be among the highest. They also tend to pop up when you least expect them. Having a sufficient amount set aside for medication, treatment, and long-term care can help prepare your family for whatever the future holds.
Build Your Cash Flow
Mapping out your various income sources ahead of time – from your retirement accounts to Social Security benefits to your income-generating investments – can help you assess where you stand relative to your retirement goal. A member of our team can work with you to bolster your retirement cash flow and manage your taxes so that you can keep more of what you’ve earned.
Consider Tax Implications
Without proper planning, taxes can end up having a significant impact on your retirement income. When it comes to optimizing your retirement account contributions, ask yourself whether you anticipate being in a higher or lower income tax bracket in retirement. The answer to this question will determine how you spread your savings between tax-deferred and Roth accounts. If you have taxable investment accounts in addition to tax-advantaged ones, consider which investments should be held in each account.
Adjust Asset Allocations
Achieving the right mix of safety, predictability, tax efficiency, and income generation with your investments can go a long way toward providing your family with the money they need while not over-exposing you to the whims of the markets. Our investment team can help determine an asset allocation to support your family’s lifestyle as you enjoy your golden years.
Maintain a Withdrawal Strategy
Identifying a withdrawal strategy that works for you – then sticking to it – can be key to making your nest egg last. Your withdrawal strategy should take into account your investment allocation, tax situation, life expectancy, and the needs of your family.
Plan in Segments
It can be difficult to make a financial plan for 10 or 15 years into retirement, particularly if you haven’t even retired yet. Circumstances change. Instead, think about your financial plan in blocks of five years. What are your financial goals for the first five years of retirement? Once you’ve hit that checkpoint, start thinking about the next five years. While it’s important not to lose sight of the big picture when investing, planning in segments can help simplify many of your decisions.
Keep an Eye On Inflation
Inflation will always be present in the market and can impact your retirement strategy, particularly over time. Adjust both your withdrawal strategy and asset allocation to account for rising costs and declining purchasing power.
Work With an Advisor
Retirement looks different for everyone, and it can look different year-to-year, too. Therefore, creating a sustainable retirement plan isn’t a one-and-done task, but rather a continuous process requiring adjustments based on life situations, family circumstances, and changes in the market. At Elevage, we can work with you to help ensure your time in the retirement red zone is well spent and positions you well for the future.
This material is intended for informational/educational purposes only and should not be construed as tax, legal, or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions. Asset Allocation does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.