If you think about it, the transition to retirement begins with ending one phase of our life (career,work) followed by a neutral or unknown phase (in limbo) and finally the new beginning (here is where we develop our new identity). As with all endeavors, we need to be successful in the previous stage before we can move forward into the next phase.
At HHM Wealth Advisors, we understand that non-financial retirement planning is as important as planning the financial side of retirement. Indeed, we believe that financial advisors should first discover their clients’ most essential goals and aspirations before developing financial recommendations.
STEP 1: Envisioning Your Future
Our financial planning methodology begins with assisting the client to envision their future. Does that include:
Your lifestyle in retirement will largely dictate your financial need in retirement.
STEP 2: Identifying the Right Financial Assets
Once we have determined the financial need, we identify the financial assets that will support that need. We generally find that many retirees’ income need in retirement will come from qualified investment accounts such as IRAs, 401(k)s and other similar accounts. Many have acquired real estate during their working years and may now wish to liquidate these holdings. Finally, many have been successful in business and now have the opportunity to sell their business to family members or unrelated third parties.
We find that continued employment in retirement is an option many find attractive. How much time you may devote to this activity is driven by your passion for work, retention of customer relationships and the need for another stream of income in retirement. Of course, many retirees will also have potentially high annual Social Security benefits.
STEP 3: Analysis and Projection
The next step is a formal analysis that attempts to project retirement needs over a 25 to 40 year retirement time frame, sources of retirement income such as Social Security, Pensions and IRA withdrawals. This is a crucial step as the biggest fear of retirees is the possibility of running out of assets in retirement.
This “Retirement Income Needs Analysis” is also central to creation of an appropriate investment portfolio that will balance income needs with potential investment risks. We will recommend investments that may generate the highest returns for the level of risk the client wishes to assume.
And as one’s life changes during retirement years, so must the investment portfolio. Accordingly, we will periodically review the asset allocation of the portfolio with the client and rebalance the asset allocation to reflect the current needs of the client with current economic conditions.
STEP 4: Goal Setting and Plan Adoption
Finally, we will ensure that the client’s legacy goals are documented and a plan adopted to effectively pass the assets from one generation to the next. We encourage our clients to have “family meetings” with HHM Wealth Advisors acting as facilitators so all family members may understand and participate in the creation and execution of this plan.