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You can wait for things to turn up, or you can try being more proactive

The dramatic events in the financial and real estate markets over the past two years have impacted virtually everyone’s future. Now, even those baby boomers who were reasonably comfortable with their retirement planning, as recently as last summer, are facing a new reality.

Although retirement planning can be challenging, especially in these unpredictable times, just going along with the flow doesn’t work. Despite today’s negativity about the economy, the stock market, budget cuts, etc., I’m going to suggest some proactive elements that could get your plan back on track. In short, I believe there’s hope for a positive outcome if one follows a strategic path.

Before we get into what can be done immediately about defining our future, let’s look at the reality of retiring.

Everyone, of course, is aware that a retirement decision must be made because the “Big Day” will eventually come, whether we’ve prepared for it or not. We also know that once we permanently leave the work force, a re-entry is generally not an option.

Most importantly, I have found that the best way to begin planning is to envision what your personal retirement would look like. Unlike a generation ago, many people today tend not to totally leave the work force on a given day.

As you know, many retirees continue to work part time or consult in their previous profession or business, if for no other reason than to stay productive and busy. Some people teach, get advanced degrees or buy a vineyard. From a planning perspective, each activity is important because it has different implications for one’s post-retirement financial needs.

While the above exercise establishes an important planning framework, what can we proactively do right now? Reviewing current spending patterns and reducing discretionary expenditures are obvious, but necessary, first steps.

Next, on the heels of the market declines of the last quarter, a default strategy for many investors is to wait for the eventual recovery of their portfolios. A more proactive approach would be to re-examine the overall allocation of assets in order to determine if the existing allocation is still appropriate to the achievement of one’s long-term objectives.

In this context, I would encourage the investor to become more knowledgeable regarding new product solutions that have been developed over the last few years by the insurance industry, solutions specifically designed to address the needs of this generation.

Depending on one’s personal circumstances, refinancing a mortgage might make sense in order to lock in the current, historically low interest rates. Additionally, adding value to your home while you can qualify for an equity line could prove productive in later years.

Another suggestion for future planning is to consider permanent life and long-term health care insurance. Both of these categories can be important elements in a meaningful retirement strategy. As we know, the availability and cost of personal insurance is very much related to one’s current age and health. Therefore, if one is strategizing for the long term, it would make sense to implement this part of the plan sooner rather than later.

Finally, for many business owners, having a realistic business exit strategy is an important component to a retirement plan. Yet, I don’t know of any other major asset that is more difficult to integrate into a meaningful retirement strategy than the sale of a business. Therefore, it could make sense to think about selling a business in a time frame that differs from the eventual, final retirement.

In conclusion, even under the best of circumstances, planning for this life-changing decision is complex. Nevertheless, preparing for the future is preferable to just letting it happen. By focusing on one’s retirement goals, we give ourselves more time and more control to affect the desired outcome.

Henry Ford once said: “Whether you think you can, or whether you think you can’t, in both cases you’ll be right.” In preparing for your retirement, I suspect you would agree that there is only one right answer to that question.

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Dieter Thurow, MBA, CPA/PFS, is the owner of Thurow Wealth Management Inc. He is located in Healdsburg and welcomes your comments at dieter@dthurow.com.