Long-Term Financial Planning for Retirement: How to Reach Your Goals

Retirement planning is one of the most significant and impactful financial decisions you can make. Whether you plan to retire soon or sometime within the next 30 years, the earlier you start planning, saving, and investing for your future, the more time you will have to build the wealth you need to realize your retirement goals.

Long-term financial planning can often be overwhelming, but you don’t want to put it off until tomorrow.  Proper guidance and planning will reduce stress and significantly increase the odds that you achieve your financial goals and enjoy a fulfilling retirement.

Officially, you can start receiving social security benefits at the age of 62, although at a reduced rate. However, if you plan on retiring on social security alone, you will likely need more flexibility to finance most of your retirement goals.

Unfortunately, social security payments will not be enough to live on, especially compared to your former income. If you’re not planning to work until you reach retirement age, then you won’t have social security to rely on in the first place.

Right now, the best financial decision you can make to prepare for retirement is to save and invest a portion of your income. It’s never too early or too late to start, although the amount you should save will depend on how soon you begin saving.

For instance, if you started in your 20s or 30s, you can save at least 10% of your gross income. If you began saving in your 40s, bring that up to 15%. If you haven’t been saving and are in your 50s, you should save at least 20% of your gross income. But regardless of when you start saving, what’s important here is to have a plan and stick with it.

In general, the best thing you can do is manage your spending and invest the money that you save. That is the best thing you can do. And then, when you reach retirement age, you can be flexible as to the date that you do retire depending on economic circumstances and things that are going on.

If you have a long-term plan and invest your money wisely, you will gain the means to become more financially flexible with your retirement date. The more you save and invest now, the earlier you can retire.

Early retirement means exiting the workforce earlier than your retirement age, which means you will no longer earn a regular salary. On top of that, you have a shorter window to save and invest your money to gain the resources to finance your post-retirement lifestyle.

If you’re planning to retire early, you have a few things to consider, such as:

• The age you expect to retire
• Your desired post-retirement lifestyle
• Your life expectancy
• Expected and emergency medical expenses
• Current economic conditions

Once you’ve exited the workforce, you will mainly be depending on the amount you’ve saved and invested to finance your retirement, which, depending on how early you plan to retire, will be an extended amount of time. 

In a perfect world, if you started saving at least 10% of your gross income early on, you will most likely have the flexibility to retire whenever you’re ready. However, in a period of economic uncertainty, you may want to keep working for a bit longer.

Emotionally, people are much more comfortable when they’re bringing in an income during difficult times. It doesn’t really matter how much money you have saved. It doesn’t matter how much you’re spending. There’s a level of comfort we have making money to provide for our needs.

Time and time again, we’ve found this to be quite common among retirees in general, regardless of the state of the economy — and it’s certainly understandable. For many people, it can be unsettling to continue drawing from their savings without putting money back in. So, consider ways to gain a continuous income stream, even when you have retired.

There is always an emotional component when it comes to your finances, but involving those emotions in your savings and investments can heighten your impulses and hold you back from achieving your goals.

Letting your emotions steer your investment decisions can cloud your judgment. You begin to react too quickly and fail to make logical decisions. For instance, you may abandon your investment strategy during difficult market periods, which decreases your long term probability of success. 

It’s really important not to give up on your long-term investment strategy. We’ve been in periods similar to this one before, and oftentimes, people say, “Hey, I’m done with this. This is too emotionally difficult. I’m not going to invest anymore. I’m going to keep my money in cash or in a CD.” And that is just not going to get you to retirement and to the end of your life.

In periods where economic conditions are less than ideal, it’s understandable to feel concerned about your investments losing value. However, looking at your investments in the context of your long-term financial goals is also important.

Historically, periods of economic downturns are always temporary. Conditions will improve sometime in the near future and you want to be there when the economy rebounds.

The reality is we will get through this, and when we do get through it, on average, the rebound for the following year or two is very significant. So, in the story I gave earlier… where you’re afraid and no longer want to invest… then you miss that rebound, that return to the newer high. It’s going to be very, very difficult for you emotionally because you took it down. You got off, you never got back on.

Many obstacles can get in the way of your financial goals. These could be unexpected expenses, unfavorable economic conditions, or inflation, among other things. In the face of these uncertainties, it’s important to set a clear goal and stick with it. Further, if you want to seek guidance about making financial choices and investment decisions during retirement planning, we can help.

At Chacon, Diaz & Di Virgilio, we care about your financial well-being. Since our founding in 2009, we have helped people optimally manage their wealth to reach their financial goals — and we can do the same for you. Get in touch with us today to learn more about how we can help.