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Critical Decisions in Your Retirement Planning

Retirement Planning may be looked at as having two distinct phases; the Accumulation Phase and the Distribution Phase. Let’s take a look at both.

The Accumulation Phase is the period of time between starting your working career and your ultimate retirement. This is the time when you set money aside for future use. This money, when combined with Social Security and a company retirement plan (if any), will provide the income after you stop working. We can debate the “best” way to accumulate retirement dollars until the cows come home and never reach a conclusion. Asking the questions about should I invest in mutual funds or the market, or should I focus on guarantees with CDs, money markets, annuities or permanent life insurance can and should be answered with a resounding YES! After all, the alternative is not accumulating anything at all. Each savings or investment product has plenty of merit and each has ample drawback. There is no one right answer, but there are abundant “next right answers”. If indecision leads to inaction in your accumulation phase the results will be foreboding. Consider using some of each and develop a plan that fits your comfort zone.

The Distribution Phase is the period of time between the end of a working career and, well… the end. The concern here is that we have no idea how long a time that will be. So, we run the risk of a) running out of money before running out of time, or b) not enjoying our retirement lives because we are holding onto our money in fear of running out. The key issue in the distribution phase is having a plan that will account for, as best we can, how long our money can last, the income that we may enjoy from that money and steps we may take to assure that we will enjoy retirement without worry about running out of money. After all, once you hit retirement the paychecks are in the rearview mirror. Every plan needs to make sure there is a guaranteed source of income that cannot be outlived. An income at the very least that will cover living expenses: food, utilities, shelter and clothing. So, not to put too fine a point on this, some of your retirement money should find its way into an annuity.

Putting the two phases together to achieve a retirement income goal requires action, determination and ongoing attention. This is an activity that should not be postponed regardless of which phase you may be in currently. Retirement planning needs to be proactive, taking the action to pay “you” first and to consider and plan for life’s contingencies. Otherwise, you may be dependent on the “Blind Squirrel” strategy. That being… even a blind squirrel will occasionally find a nut.

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