Retirement is the stage of life that follows PRETIREment for most people. It's the stage where you completely stop working and need to rely on alternative forms of income to pay your expenses. Retirement Planning is the process of establishing a retirement income goal and gathering information about your potential sources of retirement income. The information is then used to help determine if your projected retirement cash flow is adequate to fund your needs.
Ultimately, most of us want to completely stop working at some point in our lives. We want to be certain that when we do, we'll have enough assets to live out our life happily. Planning for the point in time when you will never again have an income is stressful for many people. It's difficult to see your retirement lifestyle when it's 30 years away. Add the complexity of trying to predict your ability to save over the next 30 years, the performance of your investments, and all the events that will take place in the course of every day life and the task becomes well more than a challenge. PWA includes retirement planning in the program because our knowledge and tools can help you determine what you'll need and then simulate a series of events that will let you know if you're on the right track to get there.
The retirement planning component of the program helps you determine the amount of expenses you'll have during retirement to live the lifestyle you'd like to lead. Using your current personal profile and goals along with historical investment data, we then calculate the amount of wealth you'll need to have by your target retirement date. Once we know what you need and when you need it, we help you determine a plan for getting there through taxable investments, tax-deferred retirement accounts, and tax-free investments / accounts. We target a particular amount of liquidity at the different stages of your retirement so that you can continue to experience moderate growth of your investments in the portion of your portfolio that is dedicated to serving your needs in a particular timeframe. Once we have the plan in place, we use technology to simulate the results of the plan as if it were executed multiple times. We can derive the probability of future success given your present situation and our plan for the future. We monitor that probability of success as events change and time passes, and adjust the plan as needed to keep you on track.
Most people can do all the calculations necessary to determine the amount they should be saving for retirement. Even if you can't, it's easy to find a book or article with instructions on how to do so. The problem is that retirement planning isn't a one-time task to be accomplished using average performance information. Due to the volatility of investment performance and of ordinary life events, the only way to know whether you're retirement plan is solid and that you're on track is to simulate it's execution (incorporating the volatility) multiple times and determine the probability of successful results.
In the aerospace industry, pilots who are landing a plane are taught to keep their approach to the runway in something called the "glide path." This is the range of altitude that makes for a safe approach given that you're a certain distance from the runway. Think of that airplane coming in for a landing. It's analogous to you and your finances coming in for retirement. While the plane doesn't need to be at any particular altitude at any point in the landing sequence, there is a glide path that will enable a safe landing. PWA has the knowledge and instrumentation that gets you into that glide path and makes sure you land at retirement safely.
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