Four Steps to Building a Retirement Plan You Can Count On 

Economic uncertainty, market volatility and the looming presidential election certainly get you thinking about what the future will bring, whether you plan to retire soon or well into the future. The good news is that actions you take now can lead to financial security later, even with uncertainty along the way.

Prudent Planning Leads to Financial Security

Northwestern Mutual’s 2012 Planning and Progress study found that 77 percent of Americans believe that “having a good standard of living in retirement” is an important financial goal, yet only 45 percent have a plan in place for their financial life.

A financial representative can help you develop a plan tailored to your specific goals to put you on the right track for retirement. The process starts with discovering your unique interests, needs and circumstances, and involves four essential steps:

Step 1: Envision Your Lifestyle

Your retirement may last 20 to 40 years, and will look different as time goes on, but it is yours to design. Take time to dream, think about your options and picture what “retirement” means to you:

  • What’s your vision? What does this life stage mean to you? Do you want to focus on family, plant a garden, travel, learn a new language? Do you have specific goals in mind? Have you and your partner shared your perspectives with each other?

  • Where will you live? Do you picture yourself in a different climate, living near loved ones, or being in a place they’d like to visit? Will you travel? Will you own or rent?

  • How will you spend your time? As you build a framework for the rest of your life, you can decide what you would enjoy most. Work part-time, start a new venture, volunteer, engage in sports or hobbies, travel or all of the above?

People are reinventing retirement and choosing many rewarding options. When you sketch a picture of your future, even if you expect things to change, you create a starting point for your plan.

Step 2: Estimate Your Expenses

You will want to know what it will take to fund your retirement lifestyle and how to manage the unexpected. Start by estimating your fixed, variable and discretionary expenses.

What are your “essential” expenses? Consider monthly “must-haves” such as food, clothing, health care, housing, insurance, personal care, transportation, taxes, etc. Costs for clothing, commuting or career-related expenses might go down in retirement, but those for health care, personal care or transportation could go up.

  • How much would you need for “discretionary” expenses? Think about any “nice to have” expenditures you might make on housing, transportation, food or miscellaneous items you’d enjoy in retirement. Increased leisure time often corresponds to higher spending on hobbies, sports, entertainment and travel.

  • What financial risks could lie ahead? Recognize retirement risks and confirm how to address them, including the risk of outliving your money, market volatility in your investments, uncertainty in inflation and taxes, unexpected health care or long-term care expenses, and the risk of being unable to leave a legacy to children or charity.

A financial representative can guide you through this very important process to identify your needs and decide the best way to navigate uncertainty.

Step 3: Plan for Both Accumulation and Distribution

Saving for retirement is only the beginning – distributing your assets over time is the next step. Northwestern Mutual’s Retirement Strategy was created to provide high levels of certainty that your plan can address lifetime income, asset protection and legacy needs, including:

  • Managing retirement risk – Diversifying investments for market risk, using tax-favored vehicles for tax and inflation risk, and addressing health care, long-term care and legacy needs with insurance.

  • Applying fixed income streams to cover “fixed” expenses for lifePaying essential expenses with guaranteed income sources such as Social Security, a pension, or an income annuity such as the new SelectTM Portfolio Deferred Income Annuity.

  • Optimizing timing of Social Security benefits – Delaying Social Security to attain higher benefits for you and your spouse by understanding options and tapping other income streams to your best advantage.

Step 4: Follow Your Plan

Consistent focus on the goals ahead is the key to any plan’s success. A financial representative can help you work through the questions and details to create your retirement vision and a plan that sets you on the right path. It’s up to you to follow that plan. Practicing disciplined savings habits, making regular investments, and living within your means will help you make progress on your journey and ultimately achieve long-term financial security.