Five Tips for Safeguarding Your Retirement

The Mather Group

FIVE TIPS FOR SAFEGUARDING RETIREMENT

1 be your own advocate
When you choose an advisor, take a close look at their regulatory record for customer complaints and disciplinary action by visiting BrokerCheck. Also keep in mind that some financial firms act as both broker and investment advisor, a dual role that allows them to charge commissions and fees that can go unnoticed by investors. So, be proactive in asking questions about your total costs and what potential conflicts of interest your advisor may have. Consider engaging an independent third party to provide a free accounting of your investments. Performing this due diligence up front will give you peace of mind—and that is priceless.

2 ANTICIPATE A LONG LIFE
On average, today’s 65-year-old man lives to be 83, and a 65-year-old woman lives to be 85.1 By projecting a longer-than-average life expectancy in your retirement plan, you can have greater confidence that you won’t outlive your assets. Therefore, it’s wise to plan for your savings to last 30-40 years after retirement. That will help to ensure you have sufficient funds to maintain your lifestyle and to cover additional expenses that may arise in your later years depending on your health situation.

3 KEEP A CLOSE WATCH ON INFLATION
Inflation has recently been an increasingly hot topic for many investors, as they question how elevated inflation will affect their portfolio. At a three percent rate of inflation, an individual will lose half of his or her purchasing power every 24 years—meaning, at that rate, having $1 million in savings today would only worth $500,000 in today’s dollars 24 years from now. While it is impossible to accurately predict whether inflation will further increase, by how much, and for how long, sufficient asset class diversification, along with periodic rebalancing and tax loss harvesting, should help your portfolio withstand bouts of elevated inflation. Maintaining and updating your personal financial plan, including retirement projections, is another important way to help mitigate the risks of inflation, which are different for each person depending on the timing of your goals and the type of expenditures you plan to incur. Adjusting inflation rates in your financial plan for healthcare, education, housing, etc. will help prepare you for potential inflation risks in the future.

4 PLAN FOR DOWNSIDE SCENARIOS
When building a financial plan, start with conservative return assumptions based on your portfolio’s risk profile. Also include scenarios with significant market declines in the first few years of your anticipated retirement to see if you have bad timing risk—if so, you may need to have more assets in lower-volatility investments to help you cover a few years of expenses. Retirement generally requires that we draw from our savings to meet living expenses, and having to withdraw assets in declining markets only compounds the negative impact of those declines—your asset values have already taken a hit, and any assets you withdraw won’t have the opportunity to recover when the market goes back up. Besides safeguarding some assets for near-term expenses, you may also need to claim Social Security sooner than expected to reduce the amount you’re withdrawing from your portfolios. If you contemplate and account for downside scenarios in your plan, it will help you weather significant market downturns when they happen.

5 MAKE SMART TAX DECISIONS UPFRONT
As you transition into retirement, you have several decisions to make. If you have a pension, will you take it in the form of a lump sum or a monthly annuity? Will you roll over your 401(k) to an IRA or leave it with your employer? Will you execute a Roth conversion or maintain a Traditional IRA? What type of dynamic withdrawal strategy will maximize your retirement savings and minimize your tax bill? Making hasty or uninformed decisions could result in significant tax penalties or unnecessary tax consequences. Instead, consult with retirement and tax professionals first to help you make decisions that will optimize your taxes over the long run.

 

1 Social Security Administration, Period Life Table, 2019, https://www.ssa.gov/oact/STATS/table4c6.html.  

©2022 The Mather Group, LLC. All rights reserved.

The Mather Group, LLC (TMG) is registered under the Investment Advisers Act of 1940 as a Registered Investment Adviser with the Securities and Exchange Commission (SEC). Registration as an investment adviser does not imply a certain level of skill or training. For a detailed discussion of TMG and its investment advisory services and fees, see the firm’s Form ADV on file with the SEC at www.adviserinfo.sec.gov. The opinions expressed, and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The opinions and advice expressed in this communication are based on TMG’s research and professional experience and are expressed as of the publishing date of this communication. TMG makes no warranty or representation, express or implied, nor does TMG accept any liability, with respect to the information and data set forth herein. TMG specifically disclaims any duty to update any of the information and data contained in this communication. The information and data in this communication does not constitute legal, tax, accounting, investment, or other professional advice. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives.


The Mather Group

HOW SMART INVESTORS RETIRE™

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