By Caleb L. Swiney, Spring 2019 IAC Student Intern
This Wednesday’s word may seem simple, but there really is no universal definition for “retirement.” The choices that you make throughout your life, as both an investor and as an individual, will have a profound impact on how secure you are in retirement. Recently, FINRA published an article titled, “Kids Will Turn Your Hair Gray,” noting that 66% of people with dependent children are worried about running out of money in retirements, but that only 54% of people without dependent are worried about running out of money in retirement.
On its face, this article would seem to be about managing retirement income in relation to childcare expenses. What this article discusses, however, are general retirement guidelines that will help any investor feel secure in retirement.
In the article, FINRA provides a wealth of information on common retirement investment concerns including:
- Sources of Retirement Income
- Managing Your Retirement Income
- Working in Retirement
- Managing Healthcare Costs
- Selecting Retirement Methods
- Taxation of Retirement Income
- Long Term Retirement Planning
After reading through all of the information that FINRA provides, the most important takeaway is provided at the bottom of the “Managing Your Retirement Income” section. That information is simply that there is no “one size fits all” retirement plan. This is without a doubt one of the most important things to consider when planning for retirement. Each investor needs to seriously consider the level of risk that they want to take in their investments, how much they need to invest, and what types of expenses they will be dealing with in retirement. Without considering these factors at a minimum, your retirement plan is just guesswork.
Thinking ahead is important because every investor will have different needs and desires for their time spent in retirement. For example, those who have children may not be able to put away as much money early in their careers and should instead focus on putting away a larger percentage later in their lives. These types of investors may also want to consider taking out a very small percentage of their overall retirement investment when they first enter retirement. FINRA suggests only taking out three to five percent annually for all investors. Individuals with smaller lump sums are going to want to stay closer to the three percent mark.
At the end of the day, you have to define “retirement” in your own way by taking action and being an active participant in creating your retirement plan.