When it comes to retirement planning, many people don’t know where to start. It was easy to save, simply put money aside, choose some investments, add a little more money each paycheck and you are on your way. But when one starts thinking about retirement, it becomes a little more complicated. Scott and I think you should start planning 5 years out from retirement. But it is never too late. Start by knowing your ABCDs.

A is for Assets. Many people have money from various jobs, in various accounts. They may have a pension, but they don’t know how much. What about Social Security? These are all potential pots of money you will use in retirement. Consolidating accounts makes it easier to manage. It helps you to see how much money will be taxable in retirement and what your overall allocation to stocks and bonds might be.

B is for Budget. I’m not talking about the kind you needed when you first started out. I am talking about a realistic idea of how much you will spend in retirement. What do your needs cost? Health care is a big expense, so is housing. Start tracking your current spending. How much are the utilities? Mortgage? Will it still be there in retirement or will the house be paid off? Next, make a “fun” budget. This will be different for everyone. Some will have the expense of travel (to Europe or to visit the grandchildren), some will have the expense of playing golf, some will have boating, etc. You get the idea. You don’t really know if you have saved enough until you know how much you need.

C is for Composition. How is your money invested? Do you have too much in one stock because it was a company that you worked for? Are you too conservative? Remember your money has to grow to keep up with inflation otherwise you will run out. Are you taking too much risk? Remember 2008? Can you afford to lose 40% of your money while you are in retirement? How much risk are you taking? What is the allocation of your portfolio for 30 years of retirement?

D is for Distribution. Do you have a distribution strategy? Should you take Social Security at 62? 65? At your full retirement age? The amount goes up each year you wait. Do you need it now? Or should you bank it for later? When should you pull money from your IRA? What is the best strategy for maximizing your income and your taxes? What about a distribution strategy for your money when you pass away? Should your 35 year old child receive a lump some of your assets? What would you have done with your money at 35?

Scott and I ask these questions of our clients every day. We help them to put together a plan for retirement. Obviously a plan changes a lot in 35 years, so we review the plan each year to make sure you are still on track. If you don’t have a plan or what to learn more, then call or email us.