How safe is your retirement?

This article was written for our sponsor, Capital Financial USA.

Reaching retirement is a significant achievement. Your working days are behind you, and you're free to relax; the last thing you want is unexpected financial stress that ends your retirement quickly. By carefully planning your retirement savings as early as possible, you can make sure your funds are safe from surprise charges, fees, and commissions.

At Capital Financial Advisory Group, President & Founding Principal Peter "Coach Pete" J. D'Arruda helps individuals weed out these "financial termites" before they reach retirement.

"Many people have hidden fees and expenses from risks that they don't know they're taking, so it's vitally important that people deal with a true fiduciary planning firm that has to do what's right for the client at all times," D'Arruda said. "I've also seen people come in with portfolios loaded with what we call UFOs, or unidentified financial objects, zapping their portfolio."

UFOs can include a variety of expenses — think things like real estate trusts — and may be hard for the typical person to identify.

"Have you ever talked to anybody who had termites in their house? They probably didn't know they had termites — they thought everything was fine until they stepped on the floor one day and went right through it," D'Arruda said. "UFOs operate in the same way, eating away your portfolio from the inside out. They're not helping you fund your retirement."

Getting rid of financial termites is the first step in building a safe retirement plan. Once you've weeded out any areas of potential loss, a financial advisor can help you put your money into investment streams that work best for you. Not all investment options work for everyone's financial situations, so many advisors — like those at Capital Financial — categorize investments into risk categories.

"We break it down to three colors: red, green, and yellow. With red, there's the best potential to earn a whole lot of money and get rich quickly through things like stocks, bonds, mutual funds — but it also has the best potential to lose all your money," D'Arruda said. "When you're younger red is good, because you can take that risk and still have the chance to earn back any losses. As you get older, though, you want less red and more green, because there's less room to recover."

While red categories have the most risk and green categories are protected against loss, yellow falls somewhere in the middle. The yellow bucket should contain anywhere from three to six months' worth of living expenses. The money in this bucket is always available, but doesn't have any chance of significant gain.

Once individuals reach their fifties and start inching up on retirement, Coach Pete recommends shifting money from red accounts to green accounts. In doing so, people are able to keep their retirement funds as safe as possible.

"Since many types of green accounts have growth protection, you can lock in your gains. Not only that, but green accounts will tell you what kind of income you have to the penny, whereas red accounts just show a lump sum," D'Arruda said. "Those green accounts are essentially a crystal ball. They can tell you what kind of income you'll have 10 years, 20 years, even 30 years down the line."

With three different types of color-coded accounts to choose from, it's best to have a system in place for managing and tracking where your investments live. Many banks and financial planning firms like Capital Financial offer specialized platforms for their clients. For those just getting started with their retirement planning, there are also free apps and software that can simplify money management.

How much money you choose to put into these accounts doesn't matter as much, as long as you simply get started.

"If you put a dollar away today, you'll probably have $10 to spend in the future. I know it's more fun to spend, so let's say we set a limit, maybe five percent, and put the rest into an investment account," D'Arruda said. "That way, you'll have added financial security forever and retirement money, so you have a better chance of being independently wealthy and retired."

While financial advisors like those on Coach Pete's team are usually constantly monitoring their clients' accounts, he recommends people also regularly review their own accounts. Additionally, it can be beneficial to meet with a financial advisor once a year to make sure your financial plan is still on the right track.

Taking the time to intentionally plan out your finances now can help you retire comfortably in the future.

"If people could devote three or four hours to meeting with a real qualified planning team, they can have all the worry taken out of retirement. It's a whole lot easier to live when you have that retirement autopilot type setup, and you don't have to worry anymore about where the income is going to come from," D'Arruda said. "It's up to you to have your own pension, and if you set the wheels in motion right now, you can retire a lot sooner than you think — and do so comfortably."

This article was written for our sponsor, Capital Financial USA.