As we say goodbye to 2012 and prepare for the new year, resolutions come to mind. The new year can be the perfect place for a fresh start for a company and its owners.
Oftentimes business owners, who already have a lot to consider when planning their annual business strategy, neglect to take a hard look at their own financial health. While everyone can benefit from a year-end financial health chectkup and makeover, if you’re in the final stages of your career, now is a good time to make sure you have your affairs in order. Consider adding these resolutions to your list to help ensure a smooth transition from the workplace to retirement.
Review your monthly expenses and budgetIt is useful to know exactly what you spend each month and create a budget that makes sense for your long-term needs. While employed and earning a salary, it’s often easy to make up an overage in spending that happens today the next time you receive a paycheck.
You won’t have this same luxury once you retire.
Examine what it costs to cover the essentials and determine how much you spend on discretionary items. Look carefully at the expenses that tend to fluctuate each year including entertainment, travel and health care.
Replace your paycheckUpon retirement, one of the best moves you can make is to replace the paycheck you used to receive on a regular schedule so you have a predictable amount of income every month. To do so, you will want to carefully examine your retirement account balances, your lifestyle needs and wants, and any upcoming major financial changes such as the sale of a home.
The process might seem complicated, especially if you want to structure your withdrawals in the most strategic and efficient way.
Expert advice can help create a plan for your retirement years and rely on this roadmap to help alleviate stress that might come with managing a fixed income.
Review your portfolioIf you’re nervous about your retirement accounts and invested assets, review your portfolio with your financial adviser. Perhaps your investments fluctuated during the recession. Maybe it’s time to reallocate assets to a stable set of funds that won’t waver widely with the market. Either way, knowing exactly where you stand will help you sleep peacefully each night.
Evaluate how your assets are allocated and make investment suggestions that can help offer a level of growth, income or preservation that’s right for you. Taking this balanced approach is vitally important as you enter your retirement years.
Remain calm and rationalIf it’s your habit to watch the 24/7 financial news networks, do yourself a favor and find a new hobby as you enter retirement. A steady stream of economic news puts many people on red alert status. The constant swings of the market can even cloud good judgment and prompt you to make sudden changes to your investment strategy. It’s just not healthy.
When you retire, try to adopt and maintain a steady-as-she-goes philosophy. Making risky investments, buying or selling property, or withdrawing all of your money from liquid investments may seem like a good idea today but might cost you financial security in the long run.
Instead, focus on stabilizing your financial situation. Consider developing a retirement network of friends and family members with whom you can talk candidly about financial decisions. This network will help you through anxieties and keep you on solid footing when it comes to financial decision making.
Prepare for the unexpectedIf you don’t already have a will, resolve to get one in the new year. If you have one in place, make sure it reflects your current wishes and double check your beneficiary designations. Also, set aside time to discuss your plans with your spouse or significant other as well as your children – and tell those closest to you where they can find your important documents. These can be difficult conversations for everyone involved, but they will help reduce the amount of stress you and your family may face in the future.
Paula Dougherty, CFP, ChFC, CLU, is a financial adviser with Dougherty & Associates, Ameriprise Financial Services Inc. in Springfield. She is licensed in Missouri, Arkansas, Kansas, California and Arizona and may be reached at paula.j.dougherty@ampf.com.
