Do you have a plan for your retirement? – Lowell Sun

Most people know that the sooner they begin saving for retirement the better. However, saving money in a retirement plan (i.e., 401k, 403b and IRA) and having a plan for your retirement savings are two different things.

When I first meet with a potential client, I will often ask them to answer the following three questions.

1) Do you know how much income you will need annually to live comfortably in retirement?

2) Do you know who much money you will need to save?

3) Do you know what rate of return you need on your investments to achieve your goal?

Over the last 20 years I don’t recall anyone answering “yes” to all three questions. In fact, the vast majority could not answer “yes” to even one question.

The truth is that if you can’t answer yes to all three questions, you are leaving your lifestyle in retirement to luck. One way to increase your chances of living the lifestyle you want in retirement is to develop a written investment plan.

Creating a written plan helps you to decide exactly what your objectives are and establishes guidelines for achieving them. Much like a blueprint for building a house, having a written investment plan serves as the blueprint for building your portfolio. Having a written investment plan with clear and realistic goals is the key to long-term financial success.

The key components of an investment plan should include such things as:

• Investment goals and time horizons
• The minimum amount of savings needed to achieve goals.
• How much income you can safely withdraw
• The average annual return needed to accomplish those goals
• Rebalancing procedures
• Portfolio volatility limitations
• The risk level of the portfolio
• Fund selection guidelines
• What is the expected rate of return for the portfolio
• What is your target asset allocation mix


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