Building Your Yellow Brick Road to Retirement

If you have not yet defined your goals and built your financial plan (to align your resources with those goals), you might be more nervous with stock market fluctuations right now than those who have. 

What ‘bricks’ are typically included when building your plan?

🧱 Your specific goals

🧱 Retirement plan

🧱 Investment plan

🧱 Tax plan

🧱 Income plan

🧱 Estate plan

🧱 Risk protection plan

🧱 Medical/health plan

🧱 Other specifics unique to you  

 

Good news? It's never too late to build your yellow brick road.

Bad news? If your yellow brick road doesn’t exist (or is full of lions, tigers, and bears), it may be time to update your strategy.

 

Let’s take a look at the “bricks” involved in building your own yellow brick road to retirement:

 

Brick One: Your Specific Goals

Why do goals matter when planning for retirement? If you don’t know where you’re going, you won’t know how to get there. Planning for retirement is all about getting you to where YOU want to be, so it’s important to think about what matters most to you.

• What’s the ideal age you would like to retire?
• If you could retire before then, would you?
• What do you picture your days to be like once you’re not going to work every day? How does this differ from your spouse/partner?
• Is it important to you to be close to kids, family, or other loved ones?
• Is there a need to support others during your retirement (grandkids going to college, aging parents, charities, etc.)?

Once you’ve started thinking about your goals, it’s time to start building a retirement plan.

 

 

 

 

Brick Two: Retirement Plan

Consider all of the "bricks" of your retirement plan.

Your retirement plan is going to help you bring your goals to fruition. Whatever you picture doing (or not doing) in retirement, having a plan helps to bring multiple pieces together so you’re seeing the bigger picture.

Your retirement plan will consist of all of the other “bricks” on your road to retirement, and will take into consideration things like taxes and your estate plan. These things intersect throughout your life as you work, have a family, retire, pass on an inheritance, etc. Working with professionals can help you visualize how the pieces fit together and how they might impact you in retirement.

These intersections matter. We discuss this in more detail in our Intersections e-book. No matter your stage of life, where you are, or what you are currently facing, there are financial consequences to each decision. It’s important to identify your current situation, establish a course of action, and carefully consider the decisions, so your financial situation better aligns with your specific goals. 

Now that you have established a plan, or are starting to think about it, let’s talk more about those individual bricks that make up your plan.

 

 

 

 

Brick Three: Investment Plan

The types of accounts and investments you choose when saving for retirement make a big difference in how and when you’ll reach your retirement goals. For example, account types can determine when you’ll be taxed (Roth IRA vs traditional IRA), and what you invest in can influence how your investments perform (stocks, bonds, mutual funds, etc.). Deciding which accounts and investments make sense for you is based on a number of factors:

• What will your tax situation be while working and in retirement?
• Do the investments match your comfort level with market highs and lows?
• Are the investments capable of reaching your goals? 
• Are your investments all in one company? One fund? One account?

Based on the goals you’ve set, certain accounts will make more sense than others, and a financial advisor can help you understand the differences. The goal is to help you determine:

• Does the investment strategy help you reach your goals?
• Does the investment plan support your projected retirement timeline (will you outlive your investments or will they outlive you?)
• How do you get your money out of investment accounts?
• When does it make sense to take money out of investment accounts?

PRO TIP: Investing with different financial advisors or in different accounts doesn’t mean your investments are diversified. If accounts with each advisor (or previous employers) are in the same funds or same types of accounts, you probably aren’t as diversified as you think.

With a smart investment plan that considers the types of accounts and investments within those accounts, you can start looking more closely at how your money will be taxed and when. 

 

 

Brick Four: Tax Plan

Diversifying your investments is one thing. Diversifying your tax liability is a completely different—and equally important—brick in building your yellow brick road to retirement. How and when you’re taxed can have a huge impact on your retirement plan, too. The goal of aligning your tax plan with your investment plan is to keep more of what you make, which helps you get to where you want to be faster.

In addition, taxes not only affect you, but they can also affect your loved ones. It’s important to consider the tax situation that may be created when gifting assets while you’re alive or transferring assets after you’re gone.

The other reason a tax plan is important is that tax laws change! As the rules change, your plan may need to change, too. Tax planning is measurable and can change year-to-year based on the current laws.

*Tax services are provided independently of United Planners.

 

We'll tackle the other bricks like Estate Planning and Risk Protection in an upcoming blog post. Stay tuned!