Avoiding the “Retirement Drift” as You Move From a Paycheck to a Mycheck.
As thousands of boomers a day flood into retirement, many experts are beginning to feel that the financial tools and strategies Americans need for living in retirement may not be the same exact tools and strategies that we need to save for retirement. Retirees need tools and strategies specifically designed to help them transition from a life fueled by an employer-provided paycheck to a life supported by a paycheck from themselves — a mycheck. That’s a pretty big deal, and it is often underestimated by many retirees.
The question for someone entering retirement is, how do you best position what you have to ensure a safe and secure life in retirement? There is no longer a paycheck to provide you with the time to “recover” from the unexpected, like a market downturn. You have what you have, and if you do not plan accordingly, you could be faced with tough decisions, like going back to work or making major adjustments in your lifestyle.
Too many retiring Americans drift into retirement and do very little at the actual moment of retirement to reposition themselves and their resources for a life without a paycheck. All too often, these individuals are faced with tough decisions when they are confronted with things like unexpected health care costs or market downturns.
To combat drifting, a new strategy called “product allocation” has emerged. With product allocation, individuals go through a comprehensive review of the retirement assets they hold today and determine whether or not they have struck the right balance between certainty and safety and the need for continued growth. Do they have the right balance between guaranteed sources of retirement income (e.g., Social Security, pensions, annuities) and non-guaranteed sources of retirement income (e.g., mutual funds, managed accounts)? In many cases, they may be right where they need to be. In others, they may need to reposition certain retirement assets in order to strike a balance of protection and growth that reflects their specific needs.
Americans entering retirement and giving up the paycheck should take a fresh inventory of their portfolio of retirement assets and make adjustments when necessary to ensure an effective transition to 30+ years of life with a mycheck.
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