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Are You Planning Your Income, or Just Blind Investing?

Investments are great, but with so many options out there how do you know your investments are really working for you? Do they coincide with your goals? The objective isnt just to retire; it’s to retire well. That means knowing how your bills will be paid on the day to day, after you stop working. You can’t just focus on investing or saving, you need to make sure you will have accsess to your money when you need it, as well a strategy for paying daily expenses.

How much annual income will you need?

If you aren't able to answer this question, you're not ready to make a decision about retiring. And, if it's been more than a year since you've thought about it, it's time to revisit your calculations. Your whole retirement income plan starts with your target annual income, and there are a significant number of factors to consider; start out with a poor estimate of your needs, and your plan is off-track before you've even begun.

Factors to consider

It all starts with your plans for retirement — the lifestyle that you envision. Do you expect to travel extensively? Take up or rediscover a hobby? Do you plan to take classes? Whatever your plan, try to assign a corresponding dollar cost. Other specific considerations include:

  • Housing costs:

    If your mortgage isn't already paid off, will it be paid soon? Do you plan to relocate to a less (or more) expensive area? Downsize?

  • Work-related expenses:

    You're likely to eliminate some costs associated with your current job (for example, commuting, clothing, dry cleaning, retirement savings contributions), in addition to payroll taxes.

  • Health care:

    Health-care costs can have a significant impact on your retirement finances (this can be particularly true in the early years if you retire before you're eligible for Medicare).

  • Long-term care costs:

    The potential costs involved in an extended nursing home stay can be catastrophic.

  • Entertainment:

    It's not uncommon to see an increase in general entertainment expenses like dining out.

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  • Children/parents:

    Are you responsible financially for family members? Could that change in future years?

  • Gifting:

    Do you plan on making gifts to family members or a favorite charity? Do you want to ensure that funds are left to your heirs at your death?

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What is a Fiduciary...and Why Do I NEED One?

Generally two ways of obtaining financial advice: one is given by stockbrokers, and the other is given by Investment Advisors. While many investors aren’t even aware differences exist, one of the main differences is that investment advisors have a fiduciary duty to act in the best interests of their clients at all times.