I'm now about 10 years from retirement and I'm wondering - are there retirement related financial decisions I should be making now rather than waiting until I'm nearer retirement or even already retired?

Another thought provoking article by Ernie McDaniel - as seen in Forum News.
Nearly every major decision about retirement should be considered now! That may sound outrageous and unrealistic but it's more appropriate than the general inclination of people to only get started seriously thinking about options at 5 years or less from the big day. By then, retirees may discover they have fewer options - or that their dearest goals have become impossible dreams.

At 10 years out you certainly should be thinking about where you want to live. Is it where you live now? (Shreveport/Bossier is a pretty nice part of the world!) Are you considering another state? Another country? Certainly, desired lifestyle, cost of living, taxes and traveling distance from loved ones are all to be considered in choosing a location. And do you want to live in a house or an apartment or a boat or a travel home or some combination? All of these may ultimately be at least in part financial decisions.

Expected expenses during retirement should be approximated around now. That would include housing, healthcare, transportation, entertainment, hobbies, insurance…you get my drift. (Be sure to allow for price increases.)

Of course, what you can spend 10 years from now will depend on what you have coming in then, so your best effort at maximizing income will be important in the interim. That does not mean you should take inordinate risks with your retirement nest-egg! Some retirement investors make the grave error of going into a “catch-up” mode, after which they face the real possibility of falling even further behind. Now is not the time for acts of desperation.

Now is, however, the time for deliberation - and acts of foresight and wisdom. You will in a few years be making one of the most important changes ever, the transition from the “accumulation” phase of life to the “preservation and income” phase. Your investments should reflect that even now. Generally, that may mean you will want them to be more conservative and less volatile.

Many retirees gravely underestimate the amount of invested funds they must have in order to provide a desired retirement income. I suggest you plan to begin retirement with an accumulation of 15-25 times the annual income you wish to have from your nest-egg. The higher end of this range provides the comfort of being able to draw a smaller percentage from wealth each year and thus reduces the likelihood of ever running out of money - a retiree's worst nightmare. It also allows a greater margin of comfort against the potential ravages of inflation.
Get this file in PDF format by clicking on the icon below. You will need Adobe Acrobat Reader. Click here for more information.
Ernie McDaniel is a Chartered Financial Consultant and President of McDaniel Financial. He can be reached at 318-798-9022 or via email.

Back to McDaniel Home Page | Back to Article Index