What Is Retirement Plan Design?

There are many guidelines and broadly useful advice when it comes to retirement planning. However, those general suggestions are just a starting point.

Retirement planning should be a very individualized process. Everyone has unique wants and needs for retirement, as well as a unique financial position in the present.

Bridging the gap between your current situation and your desired lifestyle in retirement is where retirement plan design becomes especially important. This process focuses on your personal needs and priorities.

Retirement plan design identifies investment options, savings goals, tax management strategies, and more that are truly relevant to your needs.

Keep reading to learn more about designing retirement plans. Understanding retirement design empowers you to make more informed choices about your future. Ultimately, those decisions can support a more financially independent retirement.

Retirement Plan Design: More Than Only Investing or Saving for Retirement

It’s relatively easy to set a simple savings goal for retirement or to opt into your employer’s retirement plan. Taking those steps is certainly better than not considering retirement at all.

However, that kind of approach probably won’t fully address your needs in retirement. It may not fund the type of lifestyle you want to live after leaving the workforce.

How can you tell if you’ll have enough money to fund a potentially decades-long retirement? What about the potential for increased healthcare costs in your golden years? Or the changes in tax exposure that could lead to a higher financial burden?

Retirement plan design goes beyond the basics of saving and investing. Think of it as the bridge between where you are now financially and where you want to be in retirement. It’s long-term financial planning that takes the many changes that come with retirement into account.

A complete plan for retirement takes costs, taxes and tax reduction, income, investments, goals, and many other potential concerns and opportunities into account. It’s a personalized approach.

The journey from the present to a comfortable retirement is different for everyone, so retirement plan design should be unique, too.

Retirement plan design doesn’t stop once you exit the workforce and start enjoying your golden years, either. Retirement is a major milestone in everyone’s life, but it shouldn’t represent the end of a financial plan.

Truly complete retirement plan design continues past that point. It can help you make adjustments to remain financially secure and adapt to new challenges and opportunities.

Planning Ahead is Crucial for Retirement Plan Design

A financially independent retirement depends on informed choices. Those decisions take advantage of  the time between where you are currently and where you want to be in the future.

Consider retirement investment accounts. These funds ideally grow over decades, supported by regular contributions.

That’s one example of why it’s so important to design a retirement plan before you reach retirement. You need to leverage your power as an income earner now and the beauty of compounding returns. That way, you can take advantage of potential investment returns, and the related retirement benefits, in the long term.

You simply don’t get a do-over when it comes to retirement plan design. If a major issue is only uncovered after retirement, it may not be possible to make effective adjustments. That’s what makes planning ahead so valuable.

Starting to plan now means having a strategy in place going forward. That strategy can and often should adjust over time. However, it’s far easier to make informed adjustments with a stable foundation in place.

Key Considerations in Retirement Plan Design

A comprehensive retirement plan design takes every important financial need into account. These include, but are not limited to:

Income Planning

Retirement income planning looks at both incoming money and expenses to find a comfortable balance. NerdWallet shares a general guide to this topic, highlighting many potential sources of income in retirement along with expenses.

Retirement plan design moves past general guidance. It determines the specific income sources and expenses that are relevant to you. Additionally, and crucially, it helps you manage those sources of income, with the least tax hit, and potentially reduce expenses.

Medicare, Social Security, and More

Exactly when you file for Social Security benefits has a major influence on how much money you’ll receive for the rest of your life. Waiting longer means a larger payment each month, but delays your access to those funds. Retirement plan design can help you find the right time to make your claim.

Social Security will likely change in some form as time passes and financial stress on the program continues to build. Planning for that change in retirement is a smart decision. It can become easier when working with a wealth advisor who understands your personal finances and future retirement goals.

Medicare can be an especially valuable asset for retirees. However, there are several plans, potential additional costs for high earners, and more to consider. Retirement plan design provides support for those considerations, making it easier to find the right approach for you.

Tax Planning and Tax Reduction Strategies

State and federal tax codes are incredibly complex. The taxes applicable to you as a retiree can be very different from those relevant during your career.

From Social Security taxes to taxes on required minimum distributions from certain retirement accounts, there are many potential pitfalls. Not every tax will apply to every retiree, of course.

Retirement plan design helps you look ahead and build strategies to limit your tax exposure. It focuses on your needs to reduce tax liabilities in a way that works for you.

Who Can Help Me With Retirement Plan Design?

A fiduciary is required to put your best interests first. Partnering with a fiduciary financial planner helps you ensure your own financial health and long-term retirement strategy is always the top priority.

Beyond that key consideration, look for financial planners who take the time to understand your individual needs. We believe that level of dedication is the foundation of effective retirement plan design.
Ready to learn more about retirement plan design? Contact us today.