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The Retirement Planning Process Answers the Question 'Can I Retire?'

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In my last article, What I Wish Every Prospect Had Considered Before Asking ‘Can I Retire’?, I discussed three broad points that most investors need to ask relative to the common retirement question all advisors get from time to time. In this follow-up article, I want to review the major retirement planning process details most investors don’t think about.

Planning Process # 1: Retirement Planning Experts Are Not Fortune Tellers

There’s no financial advisor with a “magic potion” that can tell an investor that they’re exactly where they need to be, without the investor having actually saved enough money over the years and investing it with some level of risk exposure.    

Sometimes I get the feeling that investors think advisors are like fortune tellers. But a retirement planning expert focuses on managing wealth and future wealth risk mitigation. They deal with all the possible variables of future issues and risks, and prudently plan or advise an investor based on the specific facts at hand. 

If the facts of the investor’s situation are poor to start with, meaning they haven’t saved enough or they poorly invested the money over the years, then the retirement planning process isn’t going to magically turn things into a lottery winning situation. However, it may provide meaningful recommendations that can help investors achieve their goals. 

Planning Process #2: Is a Retirement/Financial Plan Perfect?    

Plans are just that. For example, say I planned to play golf this weekend on Saturday, with enough time to also watch the Alabama football game after my round. Then, assume by Friday, it’s projected to rain on Saturday or I get behind a group that’s really slow on the golf course.

Those events may cause me to get a rain check or miss the first part of the game; obviously resulting in my “plan” not working to perfection. So I can either change my tee time to miss the rain, or if I get behind, I could have the game recorded—adjusting my plan based on the ongoing facts, situation and future possibilities through risk management. The challenge comes in that I just don’t know what’s going to happen until I actually play.

The retirement planning process is no different. The shorter the time between starting to plan and retirement, the more direct correlation to a higher probability that potential risks will keep an investor from actually meeting their retirement goals. The longer the time between starting to plan and retirement always results in a lower probability that potential risks will keep an investor from meeting their retirement goals. The plan is not perfect, but it is the ongoing planning process that makes it perfect.

Planning Process #3: What Should a Real Retirement/Financial Plan Encompass?

Many investors believe that a retirement savings plan such as a 401(k) IS a retirement plan. Or that online investment growth projections about how much their savings will grow over time, with an assumed average rate of return, is a retirement plan. Sadly, these are usually the investors to whom I have to give bad news when they ask me, “Can I retire?”   

Here’s what a comprehensive retirement/financial plan should involve at a minimum:

  • Assumptions on:
  • Current income
  • Inflation rates
  • Investment growth rate
  • Current and future assets/liabilities
  • Investment contributions/savings
  • Company match
  • Asset allocation strategy
  • Detailed year–by-year cash flow projections until at least age 90
  • Estimated year-by-year income tax projections
  • Analysis of:
  • Life insurance risk
  • Disability insurance risk
  • Long-term care insurance risk
  • Wills and trust
  • Estate tax/inheritance tax
  • Retirement income
  • Pensions
  • Social security income
  • Investment income
  • Health/medical insurance projections
  • Future big purchase goals analysis

Once all these items are taken into consideration, then answers and recommendations on ways to prudently achieve a client’s goals, if possible, become evident. If these considerations are not included in an investor’s plan, then the investor isn’t really prudently planning for retirement.

Retirement planning is a process of long-term preparation using short-term information. A prudent, ongoing process is what allows investors to retire when they want. If they don’t have that process intact, most will ask the question, “Can I retire?” and get an answer they don’t want to hear.   


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