Yahoo Finance I’m a Financial Advisor: Here’s How I’m Planning for My Own Retirement
When you’re thinking about your retirement plans, the sheer multitude of options and advice available can be nothing short of overwhelming. Navigating through the sea of retirement plans, investment choices and financial strategies can leave you feeling adrift.
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That’s why GOBankingRates spoke to two financial advisors — Dominic James Murray, CEO and independent financial advisor at Cameron James, and Percy Grunwald, personal finance expert and co-founder of Compare Banks — to understand their approaches to planning for their own retirements.
With decades of combined experience in the personal finance industry, these two experts shed some light on their individual retirement strategies they’re employing to secure their golden years.
Setting Clear and Realistic Goals
Just like he advises his clients, Murray starts his retirement planning by envisioning the lifestyle he desires during his golden years. He seeks a comfortable life filled with travel, cherished moments with family and friends, and the pursuit of new hobbies. However, he emphasizes the importance of not stopping at mere aspirations.
“But having these goals isn’t enough,” he said. “I need to consider the cost and timeline associated with each of these objectives. This process is always evolving, as it’s important to reassess these goals periodically.”
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Embracing Diversification
Having witnessed the consequences of putting all eggs in one basket, Murray takes a diversified approach to his investments. He spreads his funds across various assets, including stocks, bonds, ETFs and real estate. This strategy allows him to manage risk effectively and capitalize on the potential of different sectors and markets.
Murray said, “I’m better equipped to weather market volatility, allowing me to balance potential losses in one area with gains in another. This approach reduces the likelihood of large-scale damage to my portfolio when one sector underperforms, providing stability and resilience in uncertain market conditions.”
‘The Early Bird Catches the Compounding Worm!’
As a financial advisor, Murray firmly advocates for early planning. Thankfully, he says, he heeded his own advice and began retirement planning and savings early in his career. Early investments harness the power of compound interest, leading to tremendous gains in the long run.
“The magic of compounding works best when given time, and I’ve seen it work wonders in my personal financial journey,” he said.
He went on to illustrate this with an example, demonstrating that starting a $10,000 investment at age 25 yields significantly greater returns compared to beginning at age 35.
“Let’s assume you start with a $10,000 investment at age 25 and contribute $200 monthly to this investment, with an average annual return of 7%. By the time you’re 65, your investment would have grown to approximately $703,070.
“Compare this to if you start at age 35 with the same initial amount and monthly contributions. By age 65, you’d have around $319,860. That’s a difference of over $380,000, simply due to starting 10 years earlier. Remember, when it comes to investing, the early bird catches the compounding worm!”
Build an Emergency Fund
Murray acknowledges life’s unpredictability and the potential for financial curveballs. To safeguard against unforeseen expenses, he maintains an emergency fund. This safety net provides him peace of mind, knowing that he won’t have to deplete his retirement savings prematurely.
“I also maintain a robust emergency fund,” said Grunwald. “Having liquid assets equivalent to six months of living expenses helps protect my retirement portfolio from being impacted during unforeseen circumstances.”
Strategic Tax Planning
To leverage tax benefits, Grunwald contributes the maximum allowable amount to his IRA each year.
He said, “In my case, I chose a Roth IRA, as I expect my income tax rate to be higher in the future. I also contribute to a solo 401(k) to further reduce my taxable income and save more for retirement.”
Murray also maximizes the benefits of tax-deferred retirement accounts like his 401(k) and IRA. He also plans to strategically manage withdrawals during retirement to minimize tax liabilities, enabling him to retain more of his hard-earned savings.
Regular Portfolio Review
Grunwald meets quarterly with his financial advisor to review his investment portfolio and make necessary adjustments.
He said, “This ensures that my retirement plan stays aligned with my financial goals, and we can capitalize on new investment opportunities or respond to market changes.”
‘It’s Not a Set-and-Forget Game’
Despite their extensive experience, both Murray and Grunwald make an ongoing effort to stay up-to-date with the latest financial trends, laws and strategies.Â
“I’ve always believed in the power of continuous learning,” said Murray. “In my opinion, retirement planning is not a ‘set-and-forget’ game; it’s a journey that requires ongoing adjustments and improvements.”
Grunwald agrees. “As a finance expert, I understand that the financial landscape is always evolving. I make it a point to stay informed about the latest market trends, tax laws and retirement strategies. This knowledge empowers me to make better financial decisions for my retirement.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: Here’s How I’m Planning for My Own Retirement
