James Chalmers – Senior Advisor
Some people are planners; others are procrastinators. Some are one-thing-at-a-timers, and some are a combination, depending on the topic. Retirement, though, is an area for which planning is not just nice, but necessary. Though it may feel too far in the future to reasonably plan for, once you reach your 40s or 50s, it’s critical to start putting pen to paper. A recent study[1] showed a majority of workers (76%) have some form of retirement strategy, but only 33% have it written down—which can be a key determinant in your level of long-term success at reaching your retirement goals.
We refer to this phase of life—when some of life’s big expenses, like college tuition or a home remodel, may be behind you, and retirement is likely the next big milestone—as the big push. This is the time during which you can and should make some major determinations about and plans for your financial future to give yourself the highest probability of meeting your retirement goals. If you discover your current status or plan won’t lead to your preferred destination—maybe you haven’t quite hit your savings goal, or you’re unsure how to factor tax considerations into your future financial picture—you still have time to pivot to improve your likely outcome. Wait too long, though, and some of your goals may no longer be achievable—you just may not have time to correct course.
Trying to map the right road to retirement is inarguably a daunting task—which is likely why many people fail to get into the weeds, preferring to take a guess at how much income they’ll need in retirement to support and maintain their lifestyle. A better approach is starting with the current state of your personal balance sheet—what assets and liabilities you have and what your future income stream is likely to look like so you can determine what your available savings will be. From there, it’s worth envisioning some basic outlines of your retirement goals—like at what age you’d like to retire, whether you intend to continue any part-time work thereafter, what sources of income you anticipate, and so on. Equally critical is starting to get your arms around your anticipated expenses, including tax considerations and factoring in inflation.
These considerations are just the start of crafting a sufficiently robust, comprehensive plan. Maybe you plan to leave a legacy for children or grandchildren, or you already know you’d like to be able to fund future generations’ educations. Any added complexities can make developing a coherent plan more challenging—and, importantly, can make adjusting it as circumstances change, which they inevitably will, trickier.
Living in the “there’s an app for that” era, this seems fertile ground for a technological solution—likely there’s an algorithm that can take your current financial status, account for all the variables, apply the necessary probabilities, and produce a (seemingly) failsafe plan to achieve the desired outcome. And there are undoubtedly many tools that can help with the outlines of a plan. But relying solely on calculators or apps may be insufficient in the long run because things change all the time. Goals can change. Or life may require you take a detour—possibly to pay for unanticipated expenses, whether health, or education, or something else-related. When that happens, it can be challenging to determine how best to adjust the plan.
Then, too, consider that retirement planning can be a bit like setting a reading goal. You can determine you’d like to read a certain number of books or pages in a year. You can calculate how much time you need to spend in your armchair curled up with your Dostoevsky daily. But if Crime and Punishment decorates your nightstand all year—which isn’t necessarily just a matter of discipline, but also of myriad responsibilities and options competing for your time and attention—you won’t hit your goal, no matter how well-intentioned you started the year.
So, too, with financial planning—calculating it, defining it, even writing it down may not be enough. Which is why the help of an advisor can be critical to your probability of long-term success. The best advisors spend their professional time thinking continually about retirement planning from all angles. They are immersed in the landscape, the latest developments, the risks, the possibilities, the probabilities—and they keep track of when and how any of these factors shift, which they do, often and rapidly. Consider: the tax and accounting regulatory environments, estate considerations, investing options, the investing backdrop (including the domestic political and geopolitical environments), interest rates, inflation, etc.—all shift daily. For most individuals, finding the time in their daily diaries to keep up with everything required to ensure the financial plan stays on track is challenging, if not nearly impossible. But for advisors, helping make sense of all these considerations is their primary task—not 19th on a list of 20 things to do.
If you’re amid the big push—then now is the time to start planning, while you still have an opportunity to make any necessary adjustments. Critically, engaging an experienced, top-notch advisor can help improve your results by helping you objectively assess your current status, make a sound, prudent plan, and hold you accountable to that plan, while helping you adjust as needed along the way and looking out for your best interest. Regardless of where you want to end up, step one in the big push is ensuring the task doesn’t overwhelm you to the point you procrastinate too long. In other words, step one is identifying the right advisor.
[1] TransAmerica Center for Retirement Studies. “A Compendium of Findings About the Retirement Outlook of U.S. Workers” – 21st Annual Transamerica Retirement Survey of Workers. November 2021.
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