Financial advisers spend a lot of time talking about the importance of building a retirement plan. Yet every day I meet people who have no idea what they want to do, what they have and what they will need to really enjoy this time in their life.
It always reminds me of motivational speaker Zig Ziglar’s story about famous archer Howard Hill, who won each of the 267 contests he entered. He could hit a target 50 feet away, then split the first arrow with the second.
“Is it possible that you shoot better than him?” Ziglar would ask his audience. “Yes! If he was blindfolded! How can you hit a target that you can’t see? Worse yet, how can you hit a target that you don’t even have? life !
I often share this story with clients as I see them get caught up in the daily hustle and bustle of life without setting goals for their future. (Saving, giving up, and going fishing doesn’t count as a plan.)
I recently met a couple who had already decided to retire in about three years. The husband even told his supervisor that it was his plan. But what neither of them had done – ever – was take the time to determine if that date was still possible given their finances. They didn’t have a budget or an income plan to see if they could handle life without paychecks.
Fortunately, he will receive a pension; a lot of people don’t do it anymore. But the couple can’t save that much over the next three years. If they decide they made the wrong decision, the husband may have a hard time convincing his business that they still need him as much as he needs them.
In an even more extreme example, I brought in a woman last spring who said she wanted to retire in August. So I took a pen and said, “OK, let’s talk about your assets. “
“Well I have $ 43,000 in my 401 (k),” she replied. And that was it. She was about three months away from retirement – she was already training her replacement – and she had no idea how she was going to pay from month to month, other than with Social Security. And there was another problem: because she declared before the age of full retirement, her benefits would be reduced.
She can’t turn back time to save her job, but she may end up working elsewhere for a few years to make ends meet.
Even the best savers can struggle to retire without a plan.
Many put money in tax-deferred investment accounts at work, but that’s all they did. They haven’t thought about what they will face when they have to pay taxes on the money they withdraw from these accounts. Or they might know that it would be smart to convert some of that money into a Roth IRA, but they just don’t get started.
Others struggle with portfolio management. Sometimes I see people who are way too committed to ultra-conservative investments that are not producing enough money for them to comfortably retire and keep pace with inflation. And then there are those who take too many risks for their time horizon.
I just met a gentleman who has plenty of money to live the lifestyle he wants in retirement. It is in what I call the “make no mistake” mode. If he doesn’t make big mistakes he should be fine, but each of his accounts is as risky, if not more, than the S&P 500.
He doesn’t need to take this bet to meet his income goals, but no one has ever sat down to talk to him about rebalancing his portfolio. It has a blend that is meant for accumulation and growth – not preservation and distribution. With a few adjustments, however, he should be able to receive the income he desires without unnecessary market risk.
When I organize a pre-retiree and retiree seminar, which takes place about once a month, I always ask if the people there have written retirement plans. It is rare that only one hand is raised.
Sometimes people come in very confident. They have decided how much they will have to withdraw each month, and they think they have that money in place. But they overlooked health care, long-term care, taxes, inflation, market risk, estate planning, and other issues that could hurt their retirement.
I know it takes time and money to develop a comprehensive written plan with the help of a financial advisor. It’s not a pleasant way to spend your free time, and the topics we cover can make even the best savers anxious.
But if you want to meet your retirement goals, you have to decide what they are. You’ll have a much better chance of success if you don’t shoot at a target that you can’t see – or that doesn’t even exist.
Kim Franke-Folstad contributed to this article.
Investment advisory services offered by Wall Street Financial Group, Inc and AE Wealth Management, LLC (AEWM). Wall Street Financial Group, Inc. and AEWM are not affiliated companies. AW09173995
Founder, Rooted Wealth Advisors
Zach Gray is an investment advisor and founder of Rooted Wealth Advisors. He holds series 6, 63 and 65 title registrations as well as property and casualty / health insurance licenses in Illinois, Indiana and Missouri. He recently obtained his Certified Retirement Planning Advisor designation from the College of Financial Planning.
Investment advisory services offered only by duly registered persons through AE Wealth Management, LLC (AEWM). Rooted Wealth Retirement and AEWM are not affiliates.