Preparing for Retirement Starts Today
By Michael D. Bird, CFP®, MBA
Many people think about a worry-free retirement, where each week is a comfortable collection of pleasurable activities along with a nice vacation occasionally. The reality is that retirement is a continuation of what you’ve been doing and what I call the “MacGyver” retirement. You know about the character of MacGyver who cobbles together a life-saving solution to his problem. That’s what many people do in retirement. They cobble together a retirement income from whatever they have and then live within the restrictions that they have from their retirement savings. If you want something better, start today. Here’s how.
You need to know where you are, financially speaking, and then decide where you want to go. In other words, what do you want to do in retirement? Where do you want to live? How do you want to spend your days? Think about it this way: you will have six days like Saturday, and a Sunday, every week. How do you like to spend your Saturdays now? There are other areas of your life that you may want to think about, like continuing your education, health, fitness, recreation, spirituality, financial, home, relationships and community, as well as charity. And all of these areas you need to think about with your spouse. There’s nothing more confusing than trying to start a retirement journey and you both want to go in opposite directions!
Once you have explored what you want to do, the next step is to get an idea about how you achieve your retirement ideas or dreams. You need a plan that looks at where you are and more importantly, where you are going and how you get there. The idea is that you are now on a journey and this is your roadmap. A financial plan gives you the steps you need to take now in order to get where you want to go, including all the steps in retirement. Find an advisor that will charge you a legitimate price only when you are completely satisfied. The plan should be what some call a “walk-away plan.” The plan can be implemented anywhere. Why pay a charge for that plan?
Because usually when someone prepares a plan for “free,” you pay in other ways. Here are some examples. A financial advisor that works for an insurance company may offer a plan and have recommendations for insurance. The plan is free but the insurance commissions are how the advisor gets paid. Or an advisor that only recommends investments that have a sales charge up front. Again, the commissions are how the advisor gets paid. Once you’ve decided on the plan, and by extension, the planner, it’s time to get to work.
Your plan should include action steps that will not only get you on track but keep you on track. The worst thing in the world, financially, is to get a plan, agree on what you need to do, and then do nothing. So the action steps should give you specific things to do now to get you to your retirement “jumping off point.” Some call that a destination. But it’s really just a starting point. Those action steps might include how much you need to save for retirement, how to get your financial house in order, what risks you are currently carrying on your own and how to reduce your part of the load, and how to save some money on what you’re currently doing. Ideally, you should see ways to save the price of the financial plan, just by improving what you’re already doing. Anyway, this is now your roadmap for the path to your retirement. But what if your plan isn’t “right.” It’s something you just don’t see how to do? It needs to be reworked. That’s why your planner should charge you when it’s fully complete, not just when they hand you something.
With the plan and the action steps, it’s time to do the work. Simple, but not easy. You may need to make some changes in your life. You’ll have decisions to make along the way: should I buy this cappuccino, or add that to my savings? Having a clear vision of your destination will make it easier to avoid little side-trips along the way. Your plan becomes your guiding star, your North Star for navigating the financial waters of your journey. That’s why it has to be a plan you completely agree with. It has to be achievable and it has to be you and your spouse’s plan.
You’re now on your way. That means you’ve started, not finished. So make sure that you review your progress every six months to stay on track. Your world, and the financial world, change continuously. Your plan will need to be looked at regularly to make sure you stay on-track and if your advisor doesn’t want to do that, then find one who advises and guides, not just sells. Your retirement dreams may depend on it!
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Disclaimer: This commentary is provided for educational purposes only. The information, analysis and opinions expressed herein reflect my judgment as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation as it does not address or account for individual investor circumstances. Please keep in mind that no single strategy is the best choice for all investors/retirees. Before investing, investors are encouraged to speak with a financial professional who can help evaluate decisions based on an investor’s complete financial picture and an investor’s time horizon and risk tolerance. Past performance does not guarantee future results. An investment in stocks or mutual funds can result in a loss of principal.