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10 Steps to Financial Success

10 Steps to Financial Success

Financial decisions made now may mean the difference between achieving your goals and falling short. Your Financial Professional can explain the following 10 steps in the retirement planning process, and assist you in completing the enclosed worksheets to help you make the most of your retirement income resources.

Read our 10 steps and make sure to fill out the form to access your worksheets!

STEP 1: Calculate Your Retirement Needs

Retirement experts estimate that you will want to have between 70% and 80% of your pre-retirement income to support a comparable lifestyle. This means that if your final annual salary was $60,000, you’ll want to generate about $40,000 the first year. But keep in mind, this amount may increase each year as the cost of living rises due to inflation. Over the course of a 25 year retirement, you may require more than $1,000,000 in total income to maintain your standard of living.

The following factors may influence your income needs in retirement:

  • lifestyle choices
  • lifespan
  • withdrawal rate
  • inflation
  • rising health and long-term care costs
  • taxes
  • estate objectives
  • market volatility
  • investment performance


STEP 2: Identify Your Income Sources

Understanding the sources of your retirement income is important in developing an accurate picture of your financial situation. You’ll want to determine what each source is worth, and how your entire pool of assets can best be tapped to meet your income and estate goals.

Your resources may include:

  • social security
  • employer-sponsored retirement accounts
  • (§403(b), §457, §401(a), §401(k), etc.)
  • traditional, rollover, Roth, SEP & SIMPLE IRAs
  • pensions or profit-sharing benefits
  • annuity contracts
  • taxable accounts
  • other investments
  • spouse’s income
  • part-time employment income

>>> WORKSHEET A is designed to assist you in determining your sources of retirement income. (download your interactive PDF)


STEP 3: Determine Your Expenses

It’s also wise to review all your anticipated expenses to get a clear idea of what your retirement will actually cost. As you work to design your budget, consider how your lifestyle might change over the next 25 to 30 years. Once you are retired, you may find some of your expenses will decrease. These may include work-related expenses and home mortgage expenses. Some of your other expenses, such as health care costs, may increase.

 >>> Use WORKSHEET B to gauge your expenses during retirement. (download your interactive PDF)


STEP 4: Consider Your Estate Goals

Some people seek to maximize the size of their estates, or to gift assets to family, friends, charities or causes. Others plan to spend all their assets during their lifetimes. Your financial professional can help you determine your estate objectives which will result in tax implications that will shape your financial strategy throughout retirement.


STEP 5: Review Your Insurance Needs

Often your insurance needs will change as you age. For instance, your life insurance policy may need to be updated, and health and long-term care insurance may be necessary to bridge the gaps in Medicare coverage and free up retirement savings for other goals.


STEP 6: Gain Control Of Your Assets

If you’ve participated in an employer-sponsored retirement plan, generally you will have three alternatives for the money you’ve accumulated:

  • keep the assets in your employer’s plan
  • request a lump sum payment2
  • transfer the assets directly to a rollover IRA or other qualified retirement account

 — The Benefits of Consolidation: If you have retirement plan assets in several different accounts, rolling these funds into a single account can help simplify your investments. Combining your retirement plan assets can:

  • reduce costs and paperwork
  • help you manage your savings more efficiently


STEP 7: Minimize Taxes

Taxes can erode your annual investment returns and subsequently, your income. By designing and utilizing tax-efficient strategies, you may be able to keep more of your income:

  • withdrawing from taxable accounts first
  • prolonging the tax-deferred status of retirement assets
  • the tax implications of working in retirement
  • estate tax issues


STEP 8: Determine Your Profile As An Investor

Your Legend Group Financial Professional will work with you to develop an understanding of your investment profile. Once completed, this profile can serve as the basis for creating and maintaining a suitable investment strategy. Your Financial Professional can help you assess your:

  • investment objectives
  • time horizon
  • income needs
  • risk tolerance
  • personal financial situation


STEP 9: Create An Investment Plan

Keeping your assets working for you throughout retirement can be a major factor in your ultimate success. Your investment plan should provide:

  • income to meet living expenses
  • growth to hedge against inflation
  • strategies to reduce risk and preserve wealth

— INVESTMENT OPTIONS: While some retirees choose conservative fixed income investments to minimize market risk, this strategy is not ideal for everyone because it may not provide long-term growth potential or a hedge against the impact of inflation and taxes on income. Historically, equities have been utilized in an effort to outpace inflation and increase wealth. Of course, past performance is not indicative of future results. Many retirees find that including both fixed income securities and equities in a diversified portfolio reflecting their goals and risk tolerance may be a more suitable option. Your investments may include:

  • cash equivalents
  • bonds
  • stocks
  • mutual funds
  • annuities

— MANAGING RISK: Reducing risk is often essential to investment success. While risk is a natural part of the investing journey that cannot be eliminated, several strategies can be employed to manage risk:

  • diversification
  • asset allocation
  • ongoing monitoring
  • periodic reallocations


STEP 10: Develop A Retirement Income Plan

During retirement, the consistency of a regular paycheck in a specific amount is replaced by an income stream that is generated from various sources. Your distribution strategy should satisfy specific financial needs, such as:

  • providing an income throughout your retirement years
  • providing for the income needs of a spouse
  • maintaining the tax-deferred status of your retirement savings as long as possible
  • minimizing taxes and avoiding penalties
  • leaving a legacy

— DISTRIBUTION OPTIONS: Several payout options are available for your retirement funds:

  • annuitization (for a variable or fixed annuity that provides set payments for life)
  • periodic or systematic withdrawals with amounts and frequencies based on your retirement income needs
  • partial distributions (including the option to distribute to a money market account with
  • check writing privileges)

— YOUR WITHDRAWAL STRATEGY: The method you use to turn your assets into retirement income will depend on a variety of factors including your age, your goals and how your funds are invested. In devising a suitable withdrawal strategy, consider the following:

  • limiting yearly withdrawals to 4% – 6%
  • withdrawing principal and reinvesting earnings or taking earnings in cash and accessing principal as needed
  • minimizing taxes
  • the implications of early retirement
  • avoiding penalties on retirement account distributions
  • required minimum distributions

>>> Worksheet C can help you determine if your retirement income may exceed your expenses. (download your interactive PDF)

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