When you see your doctor for your annual physical exam, you’ll nearly always begin with a blood pressure test. That’s a vital sign that shows whether your body is operating as it should. Following similar logic, periodic meetings with your financial advisor should include a checkup on your retirement plan. If you discover symptoms that your plan is going off the rails, you can ask for the right prescription to get back on track.
As is the case for many pre-retirees, it’s natural for you to want to know “the number”: the amount you must have saved in order to move from paychecks to palm trees. Many advisors can answer that question, but just as your blood pressure won’t necessarily reveal all there is to know about your physical health, so a single goal — to keep saving until you have $XYZ — may not be a complete formula for a comfortable retirement.
Other key questions might focus on the flexibility of the retirement date, the flexibility of your savings target or the flexibility of your retirement spending goals. Let’s say you plan to retire at 65 with $750,000 in your IRA, but a month before, you’re not quite there. Do you still retire? What happens when the market goes down? What is a reasonable living standard regardless of the circumstances?
This framework is fine in your 40s, but when you get within five years of retirement, you’ll want to get much more specific. Here are some thoughts to help you get deeper when you’re close.
Which Account, When?
You’ll need cash flow to fund your lifestyle after you stop working. Which accounts should you be tapping, and in which order?
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