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Retirement and Cash Flow: A Tale of Two Necessities

Posted on May 20, 2021 by

Margaret Amsden

Margaret Amsden

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People throughout the world are dealing with many uncertainties as they learn how to pivot in the face of the pandemic. But one thing at the top of many minds is retirement. It comes fast, and with people living longer than ever many are nervous about whether their cash flow will meet their needs, or whether they will outlive it altogether.

Planning early is the best thing you can do to make sure you have the resources you need during your golden years.

Retiring is so much more than simply not working. It is the beginning of a new passion project or business, a trip around the world, or purchasing a house on the lake. Making sure you plan for the costs and incomes related to each is critical to making sure you have a healthy and positive retirement.

There are several steps you can take to make that happen, but below are a few of the first items to consider.

Estimate your costs

One of the most important parts of assembling assets that will generate proper cash flow in retirement is understanding how much cash flow you will need in the first place. Most people have a decent understanding of what those needs will be, and can ballpark what the mortgage will cost, when they will need a new car, and how much they plan to spend on groceries and food every week.

But working with a financial planning professional allows people to take planning a step further. Will you be giving money to your grandkids on their birthday or to help with school? Will you be paying dues at the country club? Will you be renting out the lake house during weeks you’re not there? Those small details can play a big part in understanding incoming and outgoing cash flow in retirement. Working with someone who knows the right questions to ask is a great first step to getting there.

Are you saving enough money?

After you know what you’ll need to achieve the dreams of your retirement years, the next step is making sure there will be enough money to get you there.

The right starting point is calculating your net assets and whether they will be suitable for your retirement goals. How much have you set aside in an IRA? What have you contributed to your 401(k)? Based on market performance, how long can you plan to live using those assets? Should you begin taking from Social Security at 65 or 70?

If the sum of these sources of cash flow doesn’t meet your retirement needs, individual financial planners can help you think about ways to make up the difference. If your company matches 401(k) contributions, consider setting aside the highest amount. It is also never too late to pay into a Roth IRA that will continue to compound interest well into retirement.

Sometimes things do not go according to plan

Making a perfect annual cost estimate and having plenty of income are some of the best things you can do to plan for long-term cash flow in retirement, but sometimes the unthinkable happens and upsets your carefully thought out plans.

Maybe it’s an untimely health scare, maybe it’s an unexpected home renovation, and in the case of this year, maybe it’s a global pandemic. COVID-19 has upset retirement planning across the globe as many businesses experienced financial hardship resulting in layoffs. Although the stock market has surpassed its March 2020 losses, it too remains volatile, as does the housing market. These factors and others have clouded cash flow projections that not long ago were thought of as set in stone, making the need for contingency planning more important than ever.

Although crises are never planned, you can always plan for them. Financial planning professionals can help you do this by helping you implement a plan to have cash-on-hand to deal with them. Having liquid reserves that amount to three years of expenses in unrestricted accounts can be quite helpful, just for that reason. It will also allow you to fall back on that money rather than draw from funds intended for retirement cash flow, protecting your future.

Retiring is a milestone. It is something you have earned after a lifetime of hard work, and you deserve to enjoy it. That is why we are here to help you make your retirement years the best years of your life and ensure that even in a crisis your retirement life can be financially worry-free. Working together on a plan today will save that stress from tomorrow, and we’re ready to tackle that success with you one step at a time.

Contact Us

For additional advice on retirement and cash flow planning, please call us at 248.208.8860 or reach out today. We look forward to speaking with you soon.

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Margaret Amsden

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Margaret leads the firm’s private client services group as the point person for individual, estate and succession planning tax strategies.

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