Financial Fundamentals: Retired, what to do now?

If you're planning retirement in the next few years, you're probably taking a hard look at your portfolio due to the dramatic market downturn that has occurred in the past couple of years. Can you still salvage your original plans for retirement?

While you might be able to continue with your retirement plans, it's probably going to take a little more work to figure out how to make this happen. Furthermore, we might need to make changes in your portfolio to recover some of the losses in your retirement savings.

One of the things individuals have discovered in this market is that the closer you get to your goal, the more you need to reduce the risk of your portfolio, which may include decreasing the amount of the portfolio invested in the stock market.

Following are some various options you can do to improve your chances of retirement.

— One solution is obvious: Save more money. If the expected investment returns are more conservative, given what's going on with the markets, making larger contributions might help you make up some of the difference.

— Think about the cost of your retirement; you may wish to review your longer-range plans. If they include significant expenses such as a new retirement home, it might be appropriate to scale back your plans if your retirement portfolio has been losing ground in recent years. If you can't make up the declining of your portfolio by the time you leave the work force, consider reviewing how much you can afford to withdraw from your savings. Other ideas include downsizing your home and/or refinancing your mortgage.

— Consider working longer. While a lot of individuals don't want to think about this, the benefits to even part-time work might result in additional retirement savings even after you retire. Consider part-time work and/or consulting. Being able to leave your investment portfolio alone for even a few years can make the dramatic difference in the outcome of your retirement lifestyle.

— Taxes make a difference. It's important that you manage your retirement assets appropriately. Be aware that the withdrawals from qualified plans such as 401ks and traditional IRAs are almost always taxable. But other investments such as those outside retirement plans may not be taxed.

It might be appropriate to consider drawing the nontaxable portion of your retirement first and allowing the taxable portion to grow over time. However, these calculations can be complex; please consult with your tax adviser and your certified financial planner for specific advice in these areas.

Mark McCrocklin is a Certified Financial Planner® and a member of the Ark-La-Tex chapter of the Financial Planning Association, whose members contribute to this column weekly.

0 Responses