This process provides clients with an easier way to plan for retirement by going through certain steps to get to where they want to go.
Today, we’re breaking down each step of our process so you can get a better idea of what we cover and why they’re an important part of uncovering your ideal retirement.
Our Three Principles
Many of the people we’ve met with are just starting to get ready for retirement and need a little guidance, haven’t started planning yet, or are just simply approaching their planning the wrong way. The media can give people the idea that if they just get to a certain number, then everything will be fine. Or, they’re too focused on their investments and are only thinking about what they can’t control when there are so many things they can control that can make a big impact on retirement planning.
That’s why we’ve created five steps and three additional principles to help clients figure out what they need when it comes to retirement.
Let’s start with our three principles:
The first principle is priority. That means prioritizing what’s important. Many people are focused on the wrong things, which can make retirement planning a lot more difficult. We believe that you have to go through a certain flow of steps to make decisions, because each decision is impacts the next.
For example, if you think about baseball, what do players think about as soon as they walk up to bat? Are they thinking about whether they should steal third? No, they’re thinking about getting to first base, and then from there, how to get to second. When people are trying to get to third base while they’re still at the plate, that’s a problem. Instead, we believe you should simply look at the next thing in front of you — and prioritization is a way of doing this.
Believe it or not, a lot of people don’t have a plan. A plan is something we think everyone should have, especially when it comes to retirement or retiring early — you need to plan it out to achieve the outcome you want. For example, if you want to retire early, consider how that will affect your income, your health insurance costs, or when you to take Social Security. How do you take your pensions? Retiring early might sound like a fun way to go, but unless you plan for it, you probably won’t get the early retirement you’re dreaming of.
When you retire, a lot can change. Interest rates, tax rates, the market, and inflation can go up and down. Health insurance costs can change, and your own health will probably change as well. We believe you have to protect yourself against all of these variables through thoughtful planning so you’re ready for whatever happens. This includes things you never seem to plan for, like a family tragedy, a surprise grandchild, or an adult child who needs extra support.
Planning is about more than just the numbers, it’s about life — and life isn’t always predictable.
Our 5-Step Retirement Revelation
Now that we’ve covered our principles, let’s move on to the system we take clients through. We call this the 5-Step Retirement Revelation because when you put these five steps together, it’s like your whole retirement is revealed to you and you’ve got your plan ready to go.
What Are You Going To Need In Retirement?
Consider: What will you need every month once you retire?
Many people don’t know what they might need every month and it can take some time to figure it out. How much will you spend on yourself? What will your taxes and health costs look like? What might be added or taken away from your budget once you hit retirement?
When you retire, every day is like a Saturday. There are a lot more opportunities to spend money, and it’s important to account for your spending when thinking about what you’ll need.
What Are You Going to Make In Retirement?
In retirement, just because you’ve stopped working doesn’t mean you won’t make any money. Many people who are now retiring still have a pension, which means they have some big decisions to make about it.
Almost everyone will have Social Security. If you’re married, there will be two Social Securities, and potentially two pensions to account for along with other things like any annuities or real estate you’ve purchased. Perhaps you have some sort of investment that you can rely on for a bit for income.
There are other possibilities too. Perhaps after you retire, you’ll want to pick up a part-time job or volunteer to keep yourself busy or to fulfill your interests. What will you do with that extra income?
You’ll be making something on a regular basis during retirement, and this is your one chance to make important decisions around it before you’re there. We believe that you need to do the math right and run the numbers — and that’s something we can help you figure out.
What Do You Have In Your Safe Money Right Now?
Your safe money is your little safe of money that’s out of the market. How much money should you take out of the market if you’ve spent 35 years investing in your 401(k), into mutual funds, and into the stock market?
When investing, everyone touts long-term investment horizons, but guess what? Now you don’t have such a long long-term ahead of you and your short-term just showed up.
Any money that’s needed next month, next year, or even in the next couple of years, we think you ought to keep out of the market and keep safe.
So it becomes a question of how much money you will either keep in the market because you have a big balance or how much you will take out. We can help you project what you’re making and figure out what you’ll need in the next couple of years — and how to keep it safe in types of investments that you can rely on.
As mentioned in the last step, you have a short-term and a long-term time horizon. The average person retires around 62 and according to statistics, the second person in a couple tends to pass away at around 92. That’s a 30-year time horizon. So while your short-term has arrived, you still need to have money set aside for the long term, and that money should be set aside in a place where it can grow for what you might need in the future.
Again, when it comes to growing their money, people can get focused on stocks and thinking about making a certain percentage in the market — but you can’t control that. What you can control is how much risk you’re taking in the market, how diversified you are, and whether you’re rebalancing your portfolio.
What Do You Leave Behind?
We have a saying, do you want to leave behind some money or leave behind some bills? If you leave behind some money, you’ve got an estate. And if you have an estate, you have to figure out your strategy ahead of time.
Less than half of people have a will. It’s good to know what your plans are, and it’s also beneficial to tell your kids and family what your plans are in advance. You can even choose what’s to be done or who’s to be in charge of making decisions for you ahead of time. There are all kinds of issues with healthcare and finances while you’re still living that’s all part of your strategy, so it’s well worth your time (and for you and your family) to figure out your estate strategy.
On the other hand, sometimes people end up leaving behind bills because they didn’t prepare for some of the risks that are out there. This goes back to our protect principle.
In our opinion, when you hit retirement, there are two big risks: living too long, or living too short a life. If you pass too early, will your spouse and loved ones be okay? How much will your surviving spouse be making? It’s worthwhile to go through and create a plan for what that survivor might need — for peace of mind for you and your loved ones.
If you live too long, that’s going to cost you money. It’s well worth it to have a plan for what would happen in that situation, along with if you were to have a health care event and what you’d like to happen once you have got assisted living needs or whatever else it might be.
These are all things we have experience in helping pre-retirees plan for so they can retire with their best foot forward.
If you’d like to learn more about our planning process, be sure to check out the ‘Our Process’ page on our website, and be sure to tune into The Retirement Revealed Podcast to learn more about how we help retirees and pre-retirees uncover their ideal retirements!