Let’s change gears and now look at what you do to start long range planning of your career. This doesn’t matter if you are just starting out or about to retire. The magic word is “strategic”. That means you think carefully about what you want to happen, apply certain rules that have worked in the past and actually come out with a written plan.
So where do we start? At the beginning or at least where your beginning is right now. Say, you are thinking about retiring. This kind of planning is first going to start out with finding when a reasonable time would be to actually retire. That depends on having sufficient funds to retire and having some idea of what that retirement will look like.
*** You can see the pitfalls right away. If you don’t know how much money you will need or don’t take the steps to find out, you are going to take a chance of failing before you even get started. Next, if you don’t know what it is that you will be doing in retirement, again you face the inevitable possibility that you will end up unemployed and unhappy. So this is where your planning starts.
Ok, so you decide you will retire in 5 years and you need 1 million dollars to do so. This will assure you of a life style which will mirror what you have now as long as you don’t live past 85 years old. So now you have to make decisions about how long you need to actually have the funds to continue living at your present life style. What if you don’t die until your 95 or 100? Where do you want to be living and what do you want to be doing then? So you might have to add another $300,000 or $400,000 to your retirement account.
So there is always some risk and unknowns in making decisions like this. However, these have to be recognized and added into the equations. Not planning for the possible realities is where people run into difficulties.
It is obvious that the next step is to plan how you will amass the million dollars in five years. Hypothetically, you probably have some money in your retirement fund by now. The problem is how much more do you have to fund the account in five years time. This can easily be broken down into monthly or quarterly segments. Now the problem is to decide how you are actually going to do that. You might want to consult your CPA or Financial Adviser to review your budget and see how you can begin to save more each month. Sounds really boring but unfortunately it is a very important part of planning for retirement.
Strategic planning is not just about retiring however. It is about having a plan in place for the future, no matter where you are at in your career. So this week, identify exactly where you presently are in your career. Next week we’ll continue with what to do with that information.