Countdown to Retirement: Take Control of Your Assets


After years of saving and investing, you can finally see the big day—retirement. But before kicking back and relaxing, you still need to address a few matters.

Chief among them is assessing how much retirement income you may need. To do this, you’ll need to consider your major costs in retirement, such as housing and health care, the estimated length of your retirement, whether you will have earned income, your desired retirement lifestyle and the rate of inflation. Next, you’ll need to identify all of your potential retirement income sources and review your asset allocation.

It may sound like a lot of work, but decisions made now could make the difference between your money outlasting you or vice versa.

Calculating Your Retirement Needs

When retirement was years away, determining how much income you would need to sustain you in your golden years may have involved a lot of estimates. Now, you can likely be more accurate in your calculations. Consider the following factors:

  • Your home base—Do you intend to remain in your current home? If so, when will your mortgage be paid in full? Will you sell your current home and downsize to one of lesser value, or do you intend to “trade up”?
  • The length of your retirement—The average 65-year-old man can now expect to live about 22 more years; the average 65-year-old woman, about 24 more years. Have you accounted for a retirement of 20 or more years?
  • Earned income—More older Americans, those aged 65 and older, are working more during retirement and many are spending more time on the job than did their peers in previous years. If you continue to work, how much might you earn?
  • Your retirement lifestyle—Your lifestyle will help determine how much preretirement income you’ll need to support yourself. A typical guideline is approximately 60% to 80% of what you earn today,  but if you want to take luxury cruises or start a business, you may well need 100% or more.
  • Health care costs and insurance—Many retirees underestimate health care costs. Most Americans are not eligible for Medicare until age 65, but Medicare doesn’t cover everything. You can purchase Medigap supplemental health insurance to cover some of the extras, but even Medigap insurance does not pay for long-term care, eyeglasses, hearing aids, dental care or private-duty nursing.
  • Inflation—Although the inflation rate can be relatively tame, it can also surge. It’s a good idea to tack on an additional 3% each year to help compensate for inflation.


Running the Numbers

The next step is to identify all of your potential income sources, including Social Security, pensions, employer-sponsored retirement accounts and other personal investments. Don’t overlook cash-value life insurance policies, income from trusts, real estate and any equity in your home.

Also review your asset allocation—how you divide your portfolio among stocks, bonds and cash. Are you tempted to convert all of your investments to low-risk securities? Such a move could potentially place your assets at risk of losing purchasing power due to inflation. You may live in retirement for a long time, so try to keep your portfolio working for you—both now and in the future.


A New Phase of Financial Planning

Once you’ve assessed your needs and income sources, it’s time to look at cracking that nest egg you’ve built up. Your first step is to determine a prudent withdrawal rate.

Next, you’ll need to decide when to tap into tax-deferred and taxable (after-tax) investments. Some say that it may be better to liquidate assets in taxable accounts first, allowing any earnings on assets in traditional IRAs and other qualified retirement vehicles to potentially compound under the tax-deferred umbrella. However, keep in mind that earnings and deductible contributions in tax-deferred accounts are generally subject to income tax upon withdrawal at then-current ordinary income tax rates, and that withdrawals prior to age 59½ are generally subject to a 10% additional federal tax—on top of any regular income taxes owed.

Also, remember that, with some exceptions, the IRS mandates individuals to begin taking required minimum distributions (RMDs)—based on IRS life expectancy tables—after you reach age 70½. Failure to take the required distribution can result in a penalty equal to 50% of the required withdrawal amount.

It’s easy to become overwhelmed by all the financial decisions you must make at retirement. The most important part of the process is to consult a qualified financial professional and/or a tax advisor to make sure that you’re prepared for this new—and exciting—stage of your life!




Michele Bjorkgren, Financial Advisor
Compass Financial
p. 515.327.1020 x13
Securities Offered through LPL Financial


A little more about us:
Compass Financial is an independent, fee-based financial advisory firm in West Des Moines, Iowa. The Compass Team helps individuals and families develop an inspiring vision of their financial future and a realistic strategy.

By listening closely to our clients’ true needs, wants, hopes, desires and dreams we are able to combine Wealth Management and broad Financial Planning customized to each individual situation. It’s our goal to assist you in developing a personalized financial road map. The results from the process should include confidence that comes from planning. As we all know, life happens, sometimes ambushing the best laid plans. Accepting a new reality and adapting the financial plan is work we have done many times for our clients.

We also offer Financial Check Up or Second Opinion Services to those who want to enhance the service they are already receiving. This should lead to a better understanding of your current plans and give added confidence to your existing advisor relationship.

Sometimes life’s biggest challenges come in the form of transitions, retirement, marriage, health issues, divorce, unexpected loss, or even college savings. Our team at Compass has experienced many of these life transitions, it’s our hope to come alongside you and your family. These defining moments of life provide opportunities to implement financial strategies that can have long lasting impact. The first step is always the most difficult, but can also be the most rewarding. Please Contact Us today to receive your free, no obligation, one hour initial consultation!

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