Free Wealth Management Guide Retirement Planning: What You Need To Know | Page 5

Planning for Retirement

Risk Tolerance

Balancing the need for growth with the need for safety is
a delicate act. If you invest too conservatively, you risk
running out of money. If you invest too aggressively, you
also risk running out of money.

Determining your tolerance for risk is critic al because if
you experience a decline in your investments that you
can’t tolerate, you might abandon your investment at the
worst possible time. Knowing the percentage loss you can
tolerate in a single year without losing faith in the investment can help you choose a suitable investment allocation
and avoid making the costly mistake of getting out of the
investment during a down market. Along with understanding your tolerance for risk is the need to understand
markets and the cycles they go through.

Here are some key questions you must answer when planning for your retirement:
1. What age do I want to retire?
2. How much money will I need to have saved at my
desired retirement age to provide my desired annual
income for my life expectancy?
3. How much can I take out of my investments each
year?
4. What is my risk tolerance?
5. How will inflation impact my future lifestyle?
6. What impact will taxes have on my retirement
income?
7. How should I invest my money?
8. How should I distribute income from my investments for retirement?

Amount of Money Needed
Whether you are retired or saving for retirement, it is
important to determine the amount of money you will
need for the rest of your life. If you are not retired, you
will need to determine the age you want to retire and how
much you need to have saved by your desired retirement
age. If you are retired, you need to calculate how much
money you can withdraw each year without running out
of money before you die.

Investment Choice
Choosing the right investment portfolio is critical. Small
differences in the annual return and annual standard
deviation of your investment portfolio can have a huge
impact on the amount of money you can live on during
retirement. To learn more about how to construct an investment portfolio for your retirement, request the Wealth
Guide titled: Building An Effectively Diversified Investment Portfolio.

Retirement Income Distribution Strategy
Assembling the right portfolio is one thing. Choosing a
strategy for taking income from that portfolio is another. There are different strategies for taking income from
investments for retirement income. To learn about some
of these strategies, request the Wealth Guide titled: Retirement Income Strategies.

It is important to analyze your spending so you can base
your calculations on accurate figures. Many people don’t
have a good grasp of how much they are spending each
year and are unrealistic about how much money they need
at retirement and how much they can safely take out of
their investments each year.

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