RETIREMENT is a big word. In their younger years, many people laughed and said things like, “Can I retire now?” Retirement should be an exciting new chapter in life, a time to enjoy the fruits of your labour you worked so hard for over the years. However, in reality, many people experience a range of emotions as they get closer to retirement age as the transition from having a steady pay cheque and secure income can bring fear and uncertainty about one’s personal finances. The harsh reality is that one of the major things that keeps people up at night — not only retirees — is the fear of running out of money. It is a constant, nagging fear, and it is deeply emotional.

So, the question is: How does one balance this fear with practical tools to ensure that, during retirement years, you are not underspending, experiencing financial anxiety, or cutting too deeply into your nest egg?

The first step is to have a sound financial plan. This plan should be in place and built out in the years leading up to your retirement. You will not know where you stand financially if you are unaware of your assets, what they can support, whether you have emergency savings, or whether you have a contingency plan.

The second step is to have a sustainable idea of what your monthly expenditures are. What type of lifestyle are you comfortable with, and what is the current cost of sustaining you and your household? This will help you determine the nest egg you will need in the future. It is also important to know this so you can establish what your true withdrawal rate will be. Knowing this information will help ensure that you are aligned with your goals and not delaying necessary future expenses.

Thirdly, try to build up your short-term liquidity. These funds can be deployed when needed to meet your short-term expenses and to take advantage of investment opportunities that will benefit you in your retirement years.

Retirees are living longer, which also means you should plan for longer. People are living upwards of a decade and more beyond their retiring years. Health care is a major cost factor for retirees and continues to rise. While younger, look into building a pool of funds for the future which will help offset your fears. Or, if possible, purchase long-term insurance that will cover you in that chapter.

Lastly, speak with your licensed financial advisor about how you can grow your wealth to position you for your retirement years. When those golden years have arrived they will help you to structure a portfolio of income-generating securities with laddered buckets to support you through your retirement. A solid financial plan for your future years, with flexibility, will reduce anxiety. You will be able to adapt and adjust during retirement. Retirees with a plan can enjoy the rewards of their hard work, reframe their thoughts on discretionary spending in their golden years, and have the freedom to enjoy whatever matters the most to them.

Christine Rankine is assistant vice-president, personal financial planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm

Feedback: if you wish to have Sterling address your investment questions in upcoming articles, e-mail us at info@sterlingasset.net.jm.

Christine Rankine.