Wealth Management & Financial Planning

Wealth Management & Financial Planning

What Does a Winning Retirement Look Like?

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While sports fans enjoy the comfort of a big halftime lead, victory ultimately goes to the team with the most points at the final buzzer. In the retirement game, the winners are those able to maintain their standard of living after leaving the workforce. A hefty 401k, Roth IRA, monthly pension and optimized social security are nice, but the key is the ability to live your life. You are unique!

This column is the fourth installment in the Fiduciary Focus series. Working 29 years in the financial industry has helped me view almost all retirement decisions through four key lenses: managing risk and volatility for the families we serve; minimizing fees and expenses; controlling taxation today and tomorrow; and finally, achieving a “real return.” In investment parlance, “real” means earning an amount above 0% plus the present inflation rate.

As a Certified Financial Planner, I was trained to help families determine how much money they needed to maintain their standard of living based on their life at that time. Next, we extrapolated based on an anticipated future inflation rate to determine how much income they would need upon retirement. These calculations helped inform their investment strategy. Nearly three decades later, I work with couples in their 90s who have plenty of resources but no ability or desire to use their inflated income. Needless to say, we do it differently today.

We define real return as acknowledging that there are two types of expenditures at retirement time. Fixed expenses continue regardless of age, but social expenses are dictated by lifestyle choices. Studies show that social expenses usually begin to contract around age 66. My experience finds that families’ social expenses begin to decline closer to 68, but regardless, social expenses eventually decline.

Some retirees won’t leave their grandkids, others can’t leave their doctor and still others simply find the chair in the back room too comfortable to leave. Their social expenditures begin to decline. This phenomenon begs the question: “Why inflate the social portion of the retirement budget for life expectancy if you aren’t going to have the time or energy to use the money?”

Inflation is real and must be respected. Truth be told, inflation is much higher for retirees than for a couple age 30. Goods such as furniture, appliances and other household investments continue to drop in price with international trade. Prices for services such as hotels, barbers, and cable TV continue to climb much faster than the core inflation rate.

As fiduciaries, we are legally bound to take care of your money as if it were our own in the same financial circumstances. Thus, we must pay careful attention to the risk and volatility of the markets. We must also manage all costs related to investments and keep the tax man at bay.

But at the end of the day, a “win” occurs when we help families maintain their standard of living upon reaching retirement.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column offset=”vc_hidden-lg vc_hidden-md vc_hidden-sm”][vc_widget_sidebar sidebar_id=”sidebar-main”][/vc_column][/vc_row]

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