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5 Questions That Can Determine Your Financial Future Comments

  • By Jocelyn Black Hodes, DailyWorth's Resident Financial Advisor
  • May 24, 2013

Sailing around the world, gardening from sunup to sundown, long walks on the beach... Thinking about retirement can seem surreal and even silly when most of us are so caught up in the day-to-day grind of life. However, it is important to take time to think about it -- and the earlier the better! -- to develop a plan that will truly help you make your dreams for retirement a reality.

An easy way to think about retirement planning is to ask yourself -- and your spouse, if applicable -- the five W’s: Who? What? When? Where? Why? Your answers will provide the basis to then answer the sixth and final question of how you will achieve your goals.

Who? Who are the most important people in your life? Your spouse? Your children? Your grandchildren? Your business partner? Your pastor? Yes, retirement is about what you want, but retirement planning should also include thinking about the future financial needs of your loved ones and any other financial goals you might have before and after retirement. And as unpleasant as it is, you should also consider the potential financial strain that your and/or your spouse’s death, illness or long-term care could cause. Then consider the value (and cost) of using insurance products to protect your priorities and your family’s well-being.

What? As in, what assets do you have to work with (savings, investments, property) and what other potential sources of income you might have in the future (such as Social Security, company pensions, inheritances, sale of real estate).

When? When would you ideally not have to work anymore? Until what age do you think you will work? It is good to have two retirement ages in mind so that you can have a savings target range rather than one number that may potentially be unrealistic.

Where? Where do you see yourself living in retirement? Do you want to stay in your home, downsize -- or upsize? Do you imagine yourself staying local or moving to another state (or country) where the cost of living is more or less? Will you still have a mortgage?

Why? This is the most fun to think about. Why would you want to save for retirement? What would you do with your time and money if you had more of it? Travel? Remodel your home or buy a new one? Dedicate yourself to a hobby or learn a new skill? Spoil grandkids? Why is it important to ask yourself these questions? Because you need to have an idea of what your ideal retirement could cost over a period of time that might last 30 years. Then you can figure out the amount you need to save in the meantime in order to support your lifestyle and not outlive your money, taking taxes, inflation and your other financial goals into serious account.

Ok, so now for the final question: How? How will you save enough money to provide the income you need for a long, comfortable retirement and achieve other financial goals you and your family might have? The answer is likely a combination of funding retirement (401(k)s, IRAs), education (529s) and brokerage accounts, leveraging home equity, and purchasing annuities, life, disability and long-term care insurance.

Retirement dreaming can be fun, but retirement planning is serious business that deserves attention sooner than later. It may be worth the cost of working with a fee-only Certified Financial Planner (CFP) to go through these questions and others with you and develop a customized plan to help you and your family achieve your goals for retirement, before and beyond.

These additional stories can also help you get started:
How Much Do I Need to Retire?
Act Your Age: A Decade-by-Decade Guide to Saving
5 Big Risks to Your Retirement (from Fidelity Viewpoints)
Your DIY Financial Planning Guide

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