After three and a half decades of people coming to me for financial advice, I feel like I’ve seen it all. That said, of all the financial planning areas I advise on, retirement stands out the most. I’ve seen people prepare for their retirement the right way, and I’ve seen others who were woefully unprepared.
Preparing for a secure retirement is one of the most critical components of a well-designed financial plan. Designing a retirement strategy combines many different elements of the financial planning process and a unique combination of the things that are important to you in life and money.
Unfortunately, many enter this phase of their life with uncertainty and doubt about how the financial journey ahead of them will work out. For example, CNBC recently reported that 41% of Americans say it will take a miracle to be ready for retirement based on the latest data from the Natixis Global Retirement Index. In addition, they found that 59% of Americans said they would have to work longer than they originally planned, and 36% now believe they will never have enough money to retire.
As a trusted financial advisor and CERTIFIED FINANCIAL PLANNER™, I help clients navigate the complexity of designing and implementing a retirement strategy that works. In addition, I aim to help clients experience the fulfillment associated with financial independence.
Unfortunately, from what I have seen, there are a few common reasons why a retirement strategy fails.
1. It’s not unique to your needs.
Retirement is a complex and multifaceted human and financial equation. It requires deep thought about your life and lifestyle and requires financial forecasting many years into the future. That’s why it’s essential to design a retirement strategy that accounts for your unique needs rather than an off-the-shelf, standard retirement strategy.
A proper retirement strategy will factor in your unique spending needs and wants, as well as the lifestyle changes that you expect in retirement. In addition, your retirement strategy will need to account for your risk appetite and match your investment portfolio, risk tolerance, and income needs.
For example, suppose you plan to relocate during retirement, move to a lower cost of living state and downsize your home. Based on that adjustment, you will need less income during retirement than the standard rule of thumb may show and should be reflected in your unique plan.
Alternatively, if you plan to increase spending at the beginning of your retirement, travel the world, and cross destinations off your bucket list, you will need to factor that in. But, again, a well-designed strategy will help you provide the additional income you need during your retirement ‘go-go’ years and then taper that income back down once you reach your later retirement ‘slow-go’ or ‘no-go’ years.
By failing to customize your retirement strategy, you face the risk of coming up short for your retirement income needs, leading to a failed strategy and unnecessary retirement risks.
2. It doesn’t incorporate the 3 Pillars of Successful Retirement Plans.
Through my work as a financial advisor, I’ve developed a retirement strategy framework that focuses on the three distinct pillars of successful retirement plans. These 3 Pillars help offer my clients the peace of mind that they’ve adequately prepared themselves for their “work-free” phase of life.
A Holistic Income Strategy
When retirement starts, the paycheck stops. This can be a scary time for many as they’re now responsible for generating their own paycheck using their savings and investments. Therefore, a holistic income strategy is one of the most critical aspects of your retirement strategy and factors in all the different income streams you’ll have at your disposal to create your unique retirement paycheck.
A holistic income strategy also recognizes that income needs may change throughout retirement depending on your goals and lifestyle desires. Therefore, a solid plan will be flexible, actionable, and aligned with your unique financial goals. It will also draw from various income buckets, ensuring that you have enough money to last, while also managing your tax liability.
A Market Readiness Strategy
One of the most common fears retirees have is running out of money. Unfortunately, this can cause them to take more risk than they are comfortable with in their investment accounts. This can lead to sleepless nights due to market volatility at best and steep losses due to market corrections at worst. Therefore, an essential step in designing your retirement strategy is to complete and periodically update a risk tolerance questionnaire and use the results to guide us through your retirement investment portfolio design.
A solid portfolio readiness strategy will create a bulletproof plan, despite the ups and downs present in the financial markets. In addition, a well-designed strategy will provide the income you need without taking unnecessary risks.
A Forward-Thinking Tax Strategy
While taxes can be a significant expense throughout retirement, a well-designed strategy can limit your current tax liability and limit future tax expenses. For some, this may mean using a combination of tax-free and tax-deferred strategies. For others, it may mean converting assets from tax-deferred status to completely tax-free.
The total U.S. federal debt burden is historically high and is projected to continue to rise, potentially leading to higher future tax rates. Now is the time to start planning and arranging your financial affairs to limit your future tax burden. Failing to design a tax strategy can lead to costly and unnecessary tax expenses throughout retirement, increasing the odds of retirement strategy failure.
I am here to help.
My work revolves around helping my clients achieve successful retirement outcomes as defined by them. This means designing a unique retirement income strategy that works financially, aligned with their lifestyle goals. Nothing makes me happier than seeing my clients enter this phase of their life with clarity and confidence, knowing that they have a plan that works for them, now and in the future.
As part of the financial planning process, I guide my clients through the 3 Pillars of a Successful Retirement Plan Checklist and help them design a retirement strategy built to deliver the retirement they deserve.
To ensure your retirement strategy succeeds and achieve financial confidence today, download The 3 Pillars of Successful Retirement Plans, a “must-read” for anyone retiring within five years.