A new year is synonymous with new hopes, dreams and goals.
Now that we are 10 days into 2022, how are your New Year’s resolutions going? Have you dusted off the old treadmill and are you exercising 30 minutes each day? Have you been able to resist the leftover cookies and chocolates from the holiday season? Are you eating more fruits and vegetables and less pizza and hamburgers? Are you spending less time on your phone, mindlessly scrolling though apps? Have you finally cleaned up your basement and donated items that you haven’t used in a decade?
I ask these questions because exercising, eating healthier, spending less time on electronic devices and getting organized are consistently some of the top New Year’s resolutions each year. But we all know most resolutions fail by February. Why? Long story short, it’s because of a lack of a proper plan and little to no accountability.
While these all are great aspirations to have, I’d like to focus on one resolution that often gets missed — retirement investment goals. I know this isn’t the most exciting topic in the world, but the difference between a strong plan and disorganization could significantly impact your retirement date, lifestyle and legacy.
This is easy to achieve and stay on track, but it requires a significant amount upfront work. The first step is sort of like cleaning out your garage. Take everything out, sweep the floors, and figure out which belongings you would like to keep, sell, give, or throw away. Similarly with your investments, gather all your recent statements and lay it on your kitchen table. Sit down with your spouse and calculate exactly what you own, why you own it, and the overall purpose of each investment.
Next, evaluate your current expectations, concerns and lifestyle. An example of an expectation is estimated retirement expenses. Concerns include cost of health care, volatility in the market and parents needing care. Each topic warrants a conversation and assessment of how it will impact your retirement plan.
An evaluation of lifestyle is figuring out which date you would like to retire, monthly income needed and how long you think you’ll live. The U.S. Social Security Administration has a life expectancy calculator on its website that can show you the average number of additional years a person can expect to live, based on gender and date of birth. This website also has a few calculators to quickly figure out your estimated earnings and benefits.
Finally, the fun part begins with an exercise of thinking of all the needs, wishes and wants you desire in a perfect retirement. A few examples include a new home, vacations, new car, health care, donations, helping aging parents, helping children and grandchildren with school, and home improvements. Each of these have a different level of importance and estimated date. Write down a rough timeline of each item, dollar amount, and rank them 1-10 with 1-3 a wish, 4-7 a want, and 8-10 a need.
Now that you’ve got a good handle on what your retirement will look like, let’s go back to your financial statements and take a closer look at each investment and if they align with your goals, risk tolerance, liquidity needs and overall plan. There are several rudimentary online resources for this as well, but I would encourage you to work with a financial adviser who has the tools and experience to guide you on a financial roadmap and hold you accountable to keeping this resolution indefinitely.
Ryan Diepstra is a principal and COO at Centennial Securities. He can be reached at firstname.lastname@example.org or (616) 942-7680.