The Importance of Setting Retirement Goals

The more precise we are when setting goals for the stage as retirees, the better we can plan our retirement. 

Planning is essential in all areas and stages of life. It consists of setting a series of objectives, as well as the actions and stages that will lead us to achieve them.

Throughout life, there are many actions that we plan: trips, buying a home, our professional career... without forgetting, of course, planning our future retirement.

Why is it important to plan this stage of life?

Retirement is a moment of life in which we will find ourselves in a situation of greater vulnerability in the broadest sense of the word than in previous stages.

On the one hand, certain contingencies such as illnesses or dependency situations are more likely to occur. before which it is important that we are well covered.

On the other hand, the room for maneuver when dealing with additional financial efforts or certain unforeseen situations is much more limited. Once out of the labor market, the resources that we will be able to count on are determined: We will have a public pension of a greater or lesser amount depending on how we have contributed as workers, and which in any case will be approximately 25% lower than previous income of work and private savings that we have managed to generate and that complement said public pension.

In other words, what we have not done at the time of reaching retirement in terms of saving and planning, we will hardly be able to do since then.

Setting goals for retirement by John Labunski, making plans for the future, in other words, planning for retirement is something that will not only improve that stage of life, but it is also something that improves day-to-day life because of the peace of mind that comes from knowing that you have a plan for that future. It also makes it easier to detect if decisions need to be made to keep the savings plan on track.

Establish a timeline and expenses throughout life

Determine the most important milestones on the expenses side: the end of the mortgage, when, approximately, the children's studies will end, what the cost of current leisure is and what cost the leisure that I want to maintain in retirement will entail. This will help determine how much money will be needed in the long run.

Making decisions about what to do in retirement

What would you really want to do when you stop working? Maintain the old lifestyle without making too many changes? Move abroad, or just travel more often? Dedicate yourself to your country house? Generate new hobbies? With more free time than you have had in the active stage, it is important to think about how you are going to use it and to what extent you are going to require more or less financial resources.

Analyze present and future resources

 Determine what retirement savings you currently have accumulated and your forecasts to increase it. Establish a regular contribution plan to it and calculate what savings it will have generated at the time of retirement. It is a good way to determine if the expected savings and the objectives are aligned.

Also determine what public pension you are going to have. This will give you an idea of ​​the recurring income you can count on in retirement.

Taking action

Now, with this complete map of income and expenses, decisions can be made to improve our future retirement, such as:

·      Strengthen the future pension : Either through private savings, increasing contributions to pension plans, or by taking measures to improve the future public pension (for example, a self-employed worker who increases their contribution bases or a worker who accepts a second job at part time)

·        Review investments more frequently and be more active in their management, moving them towards more conservative positions, for example.

·        Adjust what you hope to do in retirement to activities and lifestyle that you can afford based on expected future income and expenses.

Circumstances change over time

In the first place, what we want to do in retirement are expectations seen from the long or medium term. At this stage of life, we may have to modify them due to limitations of our physical or mental health.

On the other hand, the level of savings that we estimate to accumulate at the time of retirement may vary. Although it is important to adapt the risk profile of our investments over time, the truth is that the value of investments can fluctuate up and down. We have also been able to encounter unforeseen events throughout life and have had to resort to savings that were initially assigned to retirement.

The important thing is that by setting goals, even if they are not very specific, we will be much better prepared to manage all these changes and unforeseen events and we will gain present and future peace of mind.