I have good news! You’re asking the right question, and you have time to plan. Two essential parts of my philosophy is everything is figure-out-able, and we focus on what we can do now instead of stressing about the past.

What should you do? Here are the three essential actions:

1. List your savings and investments. These are the assets that will support you once your paycheck stops. Make a list of your accounts. Include the following information for each one:

• What is the type of account? Examples are a 401(k), IRA, savings, brokerage, and CD’s.
• Where is it?
• How much is in it?
• Do you add to it each year?

2. Assess your debt. These are the amounts you owe. Write down the total amount and include the details of each one. Here is the information you need:

• What type of loan is it? Examples are a mortgage, credit card, student loan, car loan, home equity line, business loan, and personal loan.
• Who is the lender?
• What is the interest rate and when will it be paid off?
• How much is your monthly payment?

3. Tally your post-retirement income sources. These are the checks that will come automatically. Many people will only have Social Security, but be sure you look for other sources you may have forgotten about. Gather the following information about each one:

• What will be the source of income? Examples are Social Security, a pension plan, and an annuity contract.
• When will it begin?
• How much will you receive? Be sure to look not just at your own, but also spousal benefits.
• Is there an inflation adjustment? Do your payments increase over time?

Case Study
Maria came to me six years ago, when she was 57 years old. She wanted to retire in eight years, but was worried she would end up having to rely on her children in her old age. She felt guilty that she had not saved enough. The prospect of being a burden to her children kept her awake at night. She had avoided delving into the details for fear of facing what she felt would be bad news.

The Details
Fortunately, she had a 401(k) plan from her current job, to which she had been contributing regularly. Her company offered a matching contribution. She also had an old IRA from a long-ago employer, which was in CD’s at her bank.

On the debt side, Maria had 13 years remaining on her mortgage. In addition, a few years back she had tapped her credit cards to pay for some medical expenses for herself and her daughter.

For post-retirement income, she had a small pension. Because she had stayed home with her kids for 15 years, her Social Security benefit was modest.


The Action Steps

When we crunched her numbers and ran projections, we discovered that Maria was a bit behind in saving for her retirement goal. However, the picture was not as bleak as she had feared. With some intentional action over her remaining working years, she would be able to greatly improve her prospects.

We discussed a number of possible courses of action, keeping focus on her personal vision for her future and the things that were most important to her. She committed to a few key actions:

• Build up her emergency fund to $40,000, so she wouldn’t have to rely on her credit cards or other debt for unexpected expenses.
• Pay off the credit card debt and keep it at zero.
• Increase her 401(k) contributions to get the maximum company match.
• Reallocate her IRA rollover to invest in mutual funds with more growth potential than CD’s.

The Results
Maria needed a plan so she could feel on top of her finances – and so she could sleep. We have been working together over the last six years, and she is now on track for a comfortable retirement. She has saved more without feeling deprived, and the upside of that discipline is a new emotional mindset and strength.

Once Maria faced her reality and her fears, she was able to take action toward her personal goals. She now feels confident about tackling tough financial decisions, and her overall level of money stress is much lower.

We continue to meet yearly to reevaluate how she’s doing, and to adjust her strategies and investments as retirement gets closer.

Your Turn

Are you ready to make a plan? Start by listing your savings and investments, figuring out your debt, and making a list of your income after retirement. Click here for a helpful download to get you started. If you want some help walking through these steps and coming up with your own action plan, click here to schedule your free 20-minute call.

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