My family is a Disney family. If I ask my girls – my wife and daughter – where they want to go on vacation, there is no doubt Disney World will make the short list. And when I say short list, it is probably just a list of one. I love it, too, and some of our favorite family memories come from “the happiest place on earth.”
In fact, when we have friends who want to plan a trip to Disney World, they will often consult with my wife on how to best plan for the trip.
One tip we give anyone planning a trip to Disney is to make their meal reservations early. They will sometimes ask, “So, early as in first thing every morning or even the day before?” No, early as in two months before you go.
You see, Disney has a policy that allows future guests to begin making dining reservations 60 days in advance of their trip. Yes, that requires a little bit of advanced planning which some people don’t do – either they don’t know about it or simply don’t want to do it.
So, what’s wrong with “we’ll figure it out when we get there?” Nothing, really, except there’s a good chance you won’t get to eat at the most popular restaurants or at least not at any of the normal lunch and dinner times. Now, you’ll still be in Disney World, but you may find yourself wishing you had planned ahead to enjoy your visit even more.
In some ways, that’s a lot like retirement. For many, retirement is this destination and “we’ll figure it out when we get there.” But there are definite advantages when you plan ahead. There are things that will work out much better if you give them some thought before you retire.
For one, your approach to investing needs to change in retirement. I’m not just talking about your asset allocation – the mix of stocks and bonds you have in your portfolio – but the purpose. Before you retire, you are in what we call the accumulation phase. During this phase, your emphasis is on adding to your nest egg and investing it to grow. You want to accumulate as much as you can before retirement.
Once you get to retirement, you transition into what we call the distribution phase. You are no longer trying to add to your investments, but instead trying to figure out how to take withdrawals from your nest egg, hopefully without depleting it before you die. Your emphasis is on income.
Yes, you can make that change after you retire, but there are some strategies and products that can make your income more effective and efficient if you have them in place even before you retire. Planning ahead can allow you to enjoy retirement even more knowing your income strategy has elements to be tax efficient and protect you from risks like market volatility and longevity.
So when should you begin planning for income in retirement? We like to say at Kemp Harvest that it’s never too soon and it’s never too late. If retirement is still 5, 10 or even 20 years away, there are steps you can take now to make sure your plan is sound. It also means there is plenty of time to make adjustments as retirement draws closer.
Maybe you are already retired – and have been for a number of years – is it too late? Not at all. We are always happy to review with retired clients and make recommendations on how to improve their retirement plan.