A Proven Blueprint: SGL’s Four-Pillar Retirement Planning™ Approach
by Gabriel Lewit
As Buffalo Grove financial advisors, one of our primary duties is to assist people in creating retirement plans that will sustain them throughout the rest of their lives.
This may sound pretty straightforward, but it’s not. There are an incredible number of twists and turns.
While there are many known assumptions about retirement, there are equally as many unknown aspects that are difficult to predict, so they often don’t get factored into people’s retirement plans. This can cause many restless nights if your retirement plan does not allow for both the expected and unexpected.
That’s why the team at SGL Financial has developed our Four-Pillar Retirement Planning Approach. We believe that retirement planning should be a well-thought-out strategy that looks at all four pillars of a retirement journey – a journey that could last for 30 years or more:
In this blog, we’ll explore each pillar in more detail and discuss how your retirement plan should be structured to account for the “knowns and the unknowns” of life that may impact you after you are retired.
You’ve worked tirelessly for decades to accumulate assets for your retirement years. You need a strategy to facilitate a comfortable lifestyle and financial security late in life.
Six Common Retirement Concerns
Before we look at the four pillars of a successful retirement plan, let’s start with a review of six top retirement planning concerns we hear frequently from investors seeking financial advisors. It’s important that your retirement plan addresses these types of concerns so you sleep better at night.
#1 Retirement Concern- Financial Stability: Have I saved enough money to maintain our desired lifestyle (both spouses) through all of our retirement years?
#2 Retirement Concern- Healthcare Costs: Do I have enough money to cover unexpected medical expenses without depleting my savings?
#3 Retirement Concern- Investment Strategies: Are my retirement investments fully optimized to generate the income I need without taking too much risk?
#4 Retirement Concern- Debt Management: How can I reduce or eliminate all forms of debt before I retire?
#5 Retirement Concern- Social Security Benefits: When should I start taking my Social Security benefits? What about my spouse?
#6 Retirement Concern- Taxes: What will my tax situation look like after I retire? Are there ways to lower my tax liabilities in retirement?
These types of financial concerns can keep you up at night, so that’s why it’s so important to develop strategies that address your concerns about pursuing your goals as soon as possible.
Retirement Planning Pillar #1: Income
Income is a foundational element in retirement planning. The first step is to identify all potential sources of retirement income by account or source. It’s also important to document all of your retirement expenses to determine if your after-tax income is enough to support your desired lifestyle.
Balancing retirement income with your expenses is key to a fulfilling and financially stable retirement.
Retirement Planning Pillar #2: Investments
Once you retire, your investment strategy should balance your need for growth and income with a need to protect your assets from unnecessary risks. You need an investment management strategy that supports your long-term needs without exposing you to risks that can derail even the best plans. You have one opportunity to set your finances up for your post-working phase, and getting it right means considering how different investment strategies can impact your personal financial goals and risk tolerance.
Retirement Planning Pillar #3: Taxes
Your retirement plan should be structured to foster the growth of your savings and reduce the erosive impact of taxes. As you move from your working years into your retirement years, a financial advisor with expertise in tax-efficient strategies can guide you through the complexities that can affect the net returns of your investments. Tax-efficient investing focuses on maximizing your net returns after paying taxes and expenses.
Embedded in your retirement plan should be an asset location strategy. This is a tax planning tactic that involves strategically placing investments in accounts that are based on their after-tax results. Executed well, this can greatly enhance net returns and reduce your tax liabilities.
Another important strategy can be tax-loss harvesting. This approach sells losers to offset the gains of winners. This is another way to reduce your tax liabilities and increase your assets available for your future use. This strategy creates value for the losers in your portfolio. Making the most of investment setbacks using losses to offset gains can lead to reduced tax liabilities.
Retirement Planning Pillar #4: Legacy
Creating a lasting legacy for your heirs and select charitable organizations is about more than just directing where your assets should go after you and your spouse are both gone. Legacy planning is a thoughtful process of developing a plan that benefits your loved ones and supports the causes that are dear to you.
A comprehensive estate plan should include several important documents describing your estate’s distribution.
Trusts provide a valuable alternative for some couples, enabling them to control asset distribution, manage income, and produce potential tax benefits. Collaborating with a seasoned estate planner can help you develop a custom-tailored solution for your circumstances.
Like your retirement plan, because of life’s uncertainties, you should review your estate plan annually, particularly if there is a change in your beneficiaries.
Finally, charitable giving can be another pivotal component of your estate plan. Allocating a part of your estate to charities supports causes you hold dear and can substantially reduce estate taxes, thereby maximizing the impact of your legacy.
Don’t “Set It And Forget It”!
There’s a common misconception about retirement planning. Many people think you do it once, and then you have a thick binder on a shelf in your closet that you glance at every so often. But nothing could be further from the truth!
Your retirement plan should be a living document that changes with your life’s circumstances and goals. The primary purpose of creating a retirement plan is to ensure it evolves with your life choices.
If you’re ready to work on your retirement plan, the SGL Financial team is here to help.