Happiness is Financial Fitness

Retiring in Manhattan will take an entirely different financial strategy than retiring in Moab, Utah.

The good news it isn’t as bad at 2014.

That’s when the US ranked 19th worldwide in retirement quality of life according to the 2014 Global Retirement Index (GRI). The study, conducted by Natixis Global Asset Management, compares 43 countries in terms of quality of life in retirement.

Today, the US ranks 17th globally, improving slightly thanks to the strength of the country’s financial institutions, environmental gains, and healthcare spending. Yet Americans are increasingly burdened to provide their own retirement savings as companies trim pensions and healthcare benefits. Saving now for later has become an issue of paramount importance.

The primary factor: quality of life. So how does an employee create a financially fit retirement objective?

That’s where retirement plan advisors can be beneficial for plan participants. To help participants design their best retirement plan, advisors can bring together the myriad of factors impacting retirement happiness and help participants come to their financial sweet spot long before they reach retirement age.

Some of the main factors to consider when helping participants design their retirement plans include:

Geography. Retiring in Manhattan will take an entirely different financial strategy than retiring in Moab, Utah. Where your participants are located – or where they intend to be located post-retirement – affects their general sense of financial well-being. A $1 million retirement goal may be more than enough in a rural location, yet not nearly enough to last in a more expensive urban setting.

Income and savings. Include projected income from the participant’s current position in this scenario, and always allow for the loss of income for one partner (assume the unexpected). What other sources of income does your participant intend to draw from during retirement? How much can the participant realistically save apart from the retirement investments?

Future expenses. What needs or desires are going to impact those savings accounts? Ask participants to consider how often they’ll purchase a new car, a new house, a second property, or if they’ll be financing college for their children.

Retirement expenses. The same goes for retirement spending – will there be trips, new vehicles, or other additional expenses? Also, what basic expenses will your participant expect to have? Will those expenses increase or decrease at retirement age?

Healthcare needs. Participants tend to paint a glowing picture of their retirement years. But will they be healthy? Will there be recurring medical expenses from chronic or possibly terminal illness? If so, how prepared are your participants? Do they have insurance or a plan in place to offset the expense of long-term care?

Knowing how your participants intend to spend their retirement years – including expenses and their preparations for the unexpected – you can help them develop a retirement investment plan that can keep their dreams in line with reality, which can help improve their financial fitness.

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