Think Big! Big Goals Create Big Motivation. Don’t ask, Why? Ask, Why Not? Life is not a dress rehearsal. Most people do the expected. Don’t be like most people. People experience two types of regret. The first: Regret for things we did. We all have these. The second: Regrets for the shots we didn’t take, the things we didn’t do. Consider your life so far. Chances are your type 1 regrets have diminished over time. The type 2 regrets are likely still nagging you. Live your life to minimize type 2 regrets. As Nike instructs, plan to Just Do It!
Put a Price Tag on Your Dreams, and Commit to Pay It. Financial independence is a function of having enough passive income to support your life. The current you needs to know what the future you’s life will cost. You may be financially independent and just don’t know it. You may need to devote far more resources to the future you. Put pencil to paper or a keyboard to a excel and calculate the cost. Don’t forget inflation.
Line Up Your Income Spigots. Document your current income sources. Secure estimates of you and your spouse’s Social Security benefits. Remember, the future estimates are in current dollars. Add in any employer pensions you may have, private income annuities and your accumulated investments earmarked for retirement. For the latter, you must estimate the reliable income they will generate. Start with 4 percent a year.
Get Tax Smart. It’s not your account balances that count. It’s the after-tax income that you can spend. Roth accounts and taxable accounts are always worth more than pre-tax retirement plans and traditional IRAs. Consider your current and expected future tax positions. Don’t forget your current and potential future state tax collectors. Consider a plan to build Roth and taxable accounts.
Tune Up Your Investments. Determine your tolerance for investment risk, meaning fluctuations in the negative direction. Remember total stability means near zero pre-tax and inflation return and negative returns after these factors. To live is to accept risk. There is no such thing as risk free investing. Compare your current investment to your ideal mix and make the necessary changes.
Build Your Buckets. If you are like most of us, you need three things from your finances in retirement. 1. Stable principal. 2. Reliable income. 3. Growth of income. These need conflict, as things that protect principal don’t grow and don’t produce reliable income. Products that produce reliable income generally aren’t liquid and don’t offer much growth and investment that grow, also contract with disturbing frequency. The result: you need to create buckets of income allocation.
Contemplate Your Demise. None of us gets out of here alive. You’re no exception. If your death would inflict financial pain on someone you love, consider acquiring some life insurance. What great things do you want your money to accomplish after your gone? Update your beneficiary forms, wills and trusts. Don’t forget your health care directive and durable power of attorney form. This may be your most important document if protecting your assets is a priority.
The 8th step. If you want help with your simple game plan to make it big, email mlynch@barnumfg.com to start the conversation.
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