Today’s year-end planning tip is regarding budgeting expense goals for the coming year.
It’s always essential for investors to assess their expenses and plan ahead for the future.
One thing to consider is Cash Flow Management for Retirees:This is especially important since retirees must evaluate how much cash they will need in the year ahead to live on and should work with their advisor to ensure they are able to meet their cash flow needs.
Next consideration is Mitigating sequence of returns risk: Retirees should target a higher cash cushion then what is typically recommended for non-retirees in order to sufficiently mitigate the risk of experiencing lower or negative returns early in retirement when withdrawals are made from an investment portfolio. The order or the sequence of investment returns can significantly impact your portfolio’s overall value and, consequently, your ability to maintain your lifestyle later in retirement.
And here’s a budgeting Planning Tip: Over the past few year’s expenses have RISEN due to inflation. For clients that are in the DECUMULATION stage of retirement planning and drawing down their portfolio, the amount of money they need may have increased. While many financial advisors use 4% as the safe amount of money an investor can withdraw from their nest egg every year, it’s worth reassessing these numbers EVERY year based on personal circumstances, market performance, AND the economic environment, including inflation, to see if anything has changed.