4 Steps to Prepare for Retirement

4 Steps to Prepare for Retirement
According to the 2017 Retirement Confidence Survey by the Employee Benefits Research Institute (ERBI) and Greenwald & Associates “many American workers today are feeling stressed about retirement and are not taking steps to prepare for it.” Naturally they’re less confident or secure around their finances. Here are some startling facts taken right from EBRI’s March 2017 issue brief followed by 4 steps you can take today to prepare for retirement:
Findings include:
  • Six out of 10 American workers feel very or somewhat confident about having enough money for a comfortable retirement, though just 18 percent feel very confident. The share of workers reporting that they feel either very or somewhat confident has declined compared with last year (60 percent from 64 percent in 2016). Worker confidence now resembles levels measured in 2015 (when 59 percent were either very or somewhat confident).
  • In addition to lacking confidence, 3 in 10 workers report that preparing for retirement causes them to feel mentally or emotionally stressed. These stressed workers feel less financially secure and are far less confident about having enough money for a comfortable retirement than those who do not feel stressed.
  • Another 3 in 10 workers say that they worry about their personal finances while at work (30 percent). More than half of these workers believe they would be more productive at work if they didn’t spend time worrying. Among all workers, about half say that retirement planning (53 percent), financial planning (49 percent), or health care planning (47 percent) programs would be helpful in increasing their productivity at work.
  • Retiree confidence in having enough money for a comfortable retirement continues to exceed worker confidence levels. Seventy-nine percent of retirees report feeling either very or somewhat confident about having enough money to live comfortably throughout their retirement years, including one-third of retirees who feel very confident (32 percent).
  • Workers who have a retirement plan, whether a defined contribution plan, defined benefit plan, or IRA, are far more likely to feel confident about having enough money for retirement. Indeed, they have saved more than those without a plan, have taken more steps to prepare for retirement, and feel less stressed about retirement preparations.
  • Nearly 3 in 4 workers (73 percent) not currently saving for retirement say they would be at least somewhat likely to save for retirement if contributions are matched by their employer. Approximately two-thirds of nonsaving workers say they would be likely to save for retirement if automatic paycheck deductions with the option of changing or stopping them, at either 3 percent or 6 percent of salary, were used by their employer.
So what do you do if you are worried about retirement? The best thing you can do is get organized. Here are four steps you can take to help get your finances organized so that you can retire on time and stop worrying about money.
Step 1 Find a Financial Professional
The old way of finding a financial advisor was to ask you buddies who they used. Or maybe you’d use the guy at your church. The problem is that approach only proves one thing – they’re liked or likeable. It doesn’t tell you if they’re qualified. A better, more sophisticated way is to find someone based on their credentials. I’d recommend omeone that is a fiduciary, fee-only, Certified Financial Planner™ or CFP®.
A Fiduciary is someone that must put your interest ahead of their own, even if they get paid less money for making a recommendation. Not all planners are fiduciaries. See my blog post “
Does Your Advisor use the ‘F’ word?” for more details. A fee-only advisor has clear transparent fees that are easy to understand. And a CFP® is the standard education credential for financial planners.
If you’re not working with
Joseph Allotta in Chicago or myself in Michigan, the best place to find a fiduciary, fee-only, Certified Financial Planner™ or CFP® to work with is at the National Association for Personal Financial Advisors or NAPFA. NAPFA Registered Financial Advisors are all fiduciary, fee-only, and most are Certified Financial Planners™. Along with being fiduciaries, highly educated, and having clear, transparent fees, NAPFA registered financial advisors offer comprehensive financial planning.
Step 2 Have a formal Plan Done
After you’ve found an advisor, it’s time to have a plan done. A comprehensive financial advisor should offer to look at the following six areas of your finances:
  • Cash Flow
  • Income Tax
  • Insurance
  • Investments
  • Retirement
  • Estate Planning
Not everyone is going to need each area of planning. But a good planner should demonstrate that they offer financial planning beyond an investment solution.
Step 3 Implement the Plan
So you have a plan, now what? Of course, you must put it to work. This might include consolidating accounts to simplify things in retirement. You might need to change your investments to a target mix of stocks and bonds. You might need to talk to your insurance agent about raising or lowering your insurance levels depending on the analysis. And you may need to draft or update your estate planning documents to make sure your loved ones are taken care of if something happens to you.
Implementing your plan is maybe the most important part of your plan because without implementation, it has no life. Work with your advisor to implement if you don’t think you can handle it.
Step 4 Monitor the Plan
I’ve seen some pretty elaborate plans in my days. Some were even bound in a hard cover book. I personally send out a preliminary PDF report, or paper if you prefer. But I always emphasize that it’s only the beginning. Just like any area of life, there are going to be changes. So you need to monitor your plan after it’s been implemented. After all, you wouldn’t go to the doctor and have him say, “yep, you’re in perfect health. Get lost. I don’t need to see you again.” So why would your financial plan be any different? Monitoring your plan will tell you if you’re getting off track. You may wish to update it every year, or when you become uncomfortable about your finances. But it’s important to update and monitor it because certain assumptions and figures are used in planning that will become less valuable over time.
Three in ten workers worried about retirement. You don’t need that stress. Forty eight percent of retirees left the workforce early. 41% of those left due to health or disability problems. If you take some simple steps now you may retire early because you want to, not because you have to.
About the Author
Rich Feight, CFP®, EA is a fee-only Certified Financial Planner® and Professional NAPFA-Registered Financial Advisor at IAM Financial in East Lansing and Grand Rapids Michigan with 20 years of experience helping self-employed business owners and professionals organize their finances so they can retire on time. He blogs at www.thinkingbeyondnumbers.com.