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10 Steps to a Better Financial Future

June 02, 2023

Whether you’re a working member of the Baby Boomer generation, approaching retirement or already retired, here are ten steps you can take now to help improve your financial future.

  1. Seek to save a million. A general rule is that someone planning for a long retirement should seek to save $1 million for every $50,000 in annual retirement income desired. While this may be different for you, you need to build your retirement savings. As a financial planner spanning three decades as a key advisor to many in the city, one would think I would favor planning first. Act first. Start now. Do the planning for sure, but don’t wait for the plan. Use periodic and automated methods of saving to avoid procrastination. Capture the money every week or month, directly from your paycheck or your checking account.
  2. Paint a picture. You need to paint a picture of what your retirement will look like. Envision your lifestyle and goals for the first three years of retirement, even longer if you can. Where do you want to live? How do you want to stay active? What type of legacy do you want to leave?
  3. Hire a professional. If retirement is imminent, get help. (You may have been a whiz at your job, but this is serious stuff). It’s all about big mistakes and little mistakes. And you won’t get a re-take if you make a big mistake now or in the next two to three years.
  4. Seek a consistent income. If no pension, consider converting some of your portfolio and assets to products that offer income and guarantees (but understand that guarantees are based on the claims paying ability of the issuer of the product). Try to provide enough to cover your basic needs.
  5. Tax management. Be sensitive to taxes, but don’t let the tax tail wag the dog. While it doesn’t feel like it, we are in a period of historically lower tax rates. Don’t let taxation cause you to delay your savings and investing. Optimize the taxes paid to increase cash flow, preserve assets and/or reduce risk. We can be incrementally smarter in the tax dimension by using pre-tax programs such as 401(k)’s and IRA’s as well as tax deferred programs such as Roth IRA’s and annuities. Municipal bonds and growth stocks also are tax favored. Learn about these by accessing the thousands of articles online, reading one of hundreds of books on the subject, taking a course or two, and/or asking an accountant or financial planner.
  6. Diversify and re-balance. Asset allocation and diversification is critical to staying retired. Asset allocation is not just stocks, but may include real estate, bonds, annuities, artwork, mutual funds, life insurance policies and exchange-traded funds. It is critical that you understand that you can’t control market returns, inflation, taxation, and other government policies. However, you can control your portfolio risk and the money you will spend. Markets change and so will your budget in retirement. You need to continuously monitor your portfolio and make adjustments. Manage risk and return through use of asset classes and low correlation. Re-balance if necessary, but resist reacting to events. It’s best to work with a financial advisor when making these important decisions to keep your finances on track.
  7. Supplemental income has power. Retirement income typically includes Social Security, pensions, dividends, annuity flows, retirement account distributions, and general savings spend down. Consider consulting, job sharing, or other part time employment income. It takes pressure off your savings while maintaining your focus and social interaction.
  8. Estate in good order. Use time in retirement to develop and implement your plan for the disposition of your assets if you are unable or unwilling to spend them all. You have three choices: family, charity or taxation. Choose wisely.
  9. Develop your plan. Take your vision for retirement further and write down a list of your daily living expenses. This cash flow analysis will provide you with what your monthly expenditures will be. This analysis needs to be thorough, and it may be best to hire a professional. Analyze your current situation, identify your needs and wants, and take into account what you envisioned for the future in step one. And, don’t forget about planning for health care expenses – this can help you be prepared for unexpected medical bills. Determine what changes are necessary and make them.
  10. Enjoy. Someone very wise said, “It’s about the journey…” You'll enjoy life a lot more if you're not worried about your finances.

By following these steps, you can gain a measure of control over your future. Moreover, you'll likely revisit these topics several times before you reach retirement and during retirement - the point isn't to have all the answers right away but to start taking the steps to reach your financial goals.

*Diversification may help reduce, but cannot eliminate, risk of investment losses.