3 Steps for Designing the Best Retirement Solution | Blog

When planning for your ideal retirement, we often look at many different retirement planning tools and strategies. There are several aspects that we consider, but ultimately, it all boils down to one question: What’s the absolute best thing you need to do to get your retirement right?

Every decision you make around your retirement plan has one common goal – designing the best retirement for yourself and your partner.

We recently came across a fascinating interview with Nobel laureate Dr. Robert Merton, in which he discusses ways to design the best retirement solution. In one of our latest podcast episodes, Jeremy Keil explored Dr. Merton’s ideas to help you achieve your ideal retirement.

In this blog, we’ve highlighted the 3 key things you should consider while creating your retirement plan.

Before we begin, understand that there is no universal solution

When you get a new car, one which is a completely different model and brand from your previous one, you can still drive it because there are some basic, universal principles involved in driving. Every car is designed to be driven in a similar way.

However, retirement isn’t like this. 

With every new strategy or investment, you need to educate yourself about how it fits into your overall retirement picture — and you need to carefully evaluate all the costs and benefits associated with it.

Plus, everyone’s situation can vary greatly, with factors coming into play such as your marital status, age, income, health conditions, social security, pension, and investments. What worked well for your friends or neighbors isn’t necessarily the best thing for you.

It’s virtually impossible to construct a universal retirement solution that works well for everyone. That’s why our goal is to educate you so that you can know more about your investments and financial picture and can make better decisions about your finances.

Now, let’s dive into the 3 key things that can help you build a robust retirement plan tailored for your unique situation!

1. Determine Your Desired Standard of Living

When asked about their retirement goal, many people answer, “I just want a good retirement.” 

But what do they mean by that?

Dr. Merton has put it best. He says that the goal of a good retirement should be to “cover your standard of living just before you retire.” That’s exactly what we’ve been helping our clients achieve for years! If you earn a hundred grand every year, but half of it goes into taxes, retirement savings and mortgage payments, it doesn’t do much for your monthly spending, does it?

Your goal shouldn’t be replacing your $100k total income. For this example, your goal is replacing the $50k income that shows up in your checking account throughout the year.

This is why retirement planning is not about trying to maximize your total income or getting the best possible returns on your investments. Instead, it’s about achieving the same standard of living after retirement as it was before. 

This isn’t always easy to do. After all, your taxes move up and down, your healthcare costs change depending on your health and age, and even your monthly savings tend to fluctuate.

Therefore, the first thing you want to figure out is how much money you’ll need every month for the rest of your life to maintain your desired standard of living. Once you have that figured out, we can deploy various strategies to manage your expenses and taxes to keep your standard of living as stable as possible!

2. Find a Source for Your Retirement Income

Let’s say you’ve saved a million dollars by the time you’ve hit retirement. If you think that you can keep the principal amount intact and live off the returns from your investments or the interest income, then you have an outdated strategy.

Why? Because you can’t control the markets. Interest rates and yields fluctuate wildly, which means that your monthly income will keep changing and it will be difficult to maintain a stable standard of living every month.

Instead, Dr. Merton suggests setting a goal for your replacement income. Once you’ve calculated how much of your previous income you need to replace, you can use numerous retirement tools, such as your Social Security and pension, to reach your required replacement income level.

The most powerful ways you can replace your income is through:


Have you ever been approached by a financial salesperson who’s trying to sell you an annuity? Well, that’s not what we’re talking about here. When a college professor or an economist suggests that you need to get an annuity, that’s a completely different thing.

What they mean by an annuity is that you give up a lump sum of money today in exchange for a guaranteed monthly payment for the rest of your life. You have no idea how long your life is going to be, so how do you mitigate the risk of running out of money at some point in your retirement? Through an annuity!

On the other hand, when a financial salesperson is selling you an annuity, they’re most likely referring to something called a deferred annuity, where you give up a lump sum amount with an option to turn it into an annuity later. So, unless you actually convert it into an annuity, it’s just a regular investment where you must consider its potential costs and benefits.

While buying into an annuity, you want to get it at the best interest rate and the lowest cost possible. Well, guess what? Your pension and your Social Security are probably the lowest cost, highest interest rate options you’ll ever find! This is because no one’s earning any commission if you choose to defer your Social Security or pension. And Social Security set its interest rates and longevity estimates back in 1983! A lot has changed – and you can use it to your advantage

That’s why, by maximizing your Social Security and pension benefits, you’ll likely be creating the most optimal ‘annuity’ for yourself, which will ensure a steady monthly income and alleviate the risk of exhausting your entire retirement savings.


Reverse mortgages are a special type of retirement mortgage where you can receive monthly payments on your house. Your house could very well be your biggest asset, and through a reverse mortgage, you can accomplish your goal of obtaining a regular monthly income.

One of the major advantages of a reverse mortgage is that you don’t need to repay the loan until the owner of the house has passed away or moved out of the house. Plus, in some scenarios, it might be actually better for your beneficiaries to get rid of the house. And receiving that reverse mortgage income each month is tax free!

To learn more about how reverse mortgages can be an integral part of your overall retirement plan, check out our blog: 5 Ways a Reverse Mortgage can Improve your Retirement.

3. Go Through a Well-Defined Process

When you hit retirement, don’t simply try to solve individual problems right away. You only retire once, and therefore, you only have one shot to get it right. We suggest you avoid rushing into any major decisions, and that you follow a reasoned decision making process.

Instead, take the time and think about your retirement goals. Evaluate the various options available out there and carefully put your retirement puzzle together. When you have a process for it, you are more likely to get it right.

This is why we have our very own five-step retirement income process to guide you along the path of your ideal retirement.

You can also refer to Dr. Robert Merton’s 10 key design principles for achieving a good retirement:

  1. Set replacement income as the goal for retirement
  2. Address risks relevant to the goal: income shortfall, not return volatility
  3. Deliver an asset allocation strategy to manage retirement income risk
  4. Make efficient use of all dedicated retirement assets
  5. Offer personalization based on one’s retirement account characteristics
  6. Take account of changes in both market and personal circumstances
  7. Be effective even for those who are completely unengaged
  8. Supply only meaningful information and offer only actionable choices to improve your outlook
  9. Offer robust, scalable, and low-cost investment strategies
  10. Offer seamless transition and payout flexibility at retirement

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