Enter the Golden Age
So you finally reached “that age” and you’re on the brink of your “Golden Years” – Congratulations! There’s nothing more exciting than achieving a life-long goal, especially one you’ve been working your entire life for.
Everyday from here forward will be a Saturday, and although most retirees don’t feel retired because they keep themselves busy, they all agree nothing compares to the freedom they now have.
They can do what they want when they want. But before you set sail into that Sunset of eternal bliss, you’re going to be faced with several options pertaining to the blueprint of your retirement. The wrong decision can have a profound impact on both you and your family’s future.
One mistake could easily jeopardize the foundation of your retirement plan altering its ability to withstand the hard times many face through the even changing landscape of life and the economy.
Pensions…Social Security…Retirement Savings…Will they be Enough?
Majority of baby boomers and seniors feel confident when it comes to retirement partially because they belong to aging retirement programs known as pensions, a Government annuity program known as Social Security, and retirement savings accounts typically in the form of defined contributions plants (401k, tsp, 403b, 457 plan, IRA, etc.).
But will it be enough? What if market volatility crushes the principal in the investment accounts you planned to use towards your expenses?
Worse yet, what if one of you die, how will your spouse continue their life style while paying the bills considering 50% of the household income died with you?
What if you or your spouse has a long-term care need, will they be capable of lifting your heavy body up the stairs, down the halls, to the car or will you pay the average cost of $10,000 per month for in-home care?
Hours of Planning and Decades of Experience
Our mentors have spent the past 30 years as a financial advisor answering these questions. They’ve led thousands of clients through the gloom and doom and monotony of building a bulletproof retirement plan, dedicating late nights to running hypotheticals, utilizing costly and sophisticated software to cross and stress test plans – plans capable of withstanding tumultuous times….but their greatest quality was their ability to make complex things small.
One of the most admired qualities of an advisor regardless the field is his or her ability to “take the unknown, to the known, through the use of the familiar”. In regards to retirement, we use the same approach with our story of “The Baseball and the Tire”.
The Baseball and Tire
To make retirement simple, let’s imagine I hang a diesel truck tire by a rope 5 feet in front of you at eye level. The tire is very large and so is the hole in the center.
I take a baseball and place it in your hand, asking you to toss it through the tire 100 times… how many times do you think you could make it through…80…95…100? Most people say 100, and unless you have terrible aim, you’d probably get 100/100 as well.
Now imagine I replaced the diesel truck tire with a Toyota Corolla tire, the tire is smaller and so is the hole in the center, on top of that I move the tire 50 yards out – that’s half a football field!
With that same baseball, you get to try another 100 tosses… how many do you think you’d make this time? Answers vary, but the average guess is 15-20 times… It’s low right?
The Tire’s Distance and Size are Equal to Your Retirement Duration and Retirement Savings
Well, the distance from you to the tire is equivalent to how many years you’ll spend in retirement. The further the tire, the harder it is to make the ball through, thus the more difficult it is to make it through retirement.
The opposite is also true. The closer the tire, the easier it is to toss the ball through, thus the easier it is to make it through retirement.
The size of the hole represents the size of your assets. The larger the hole, the easier it is to make the ball through, thus the easier it is to make it through retirement. The smaller the hole, the more difficult it becomes to make the ball through, thus the more difficult it is to make it through retirement.
The highest probability of a successful retirement is having a lot of assets and a short retirement (dying early, or retiring late). The lowest probability of a successful outcome is having very little to no assets and a long retirement (living long, or retiring early).
Covering Needs with Lifetime Income Is the Single Most Important Aspect of a Retirement Plan
Your pension, social security, and retirement savings account are equal to the size and distance of your tire. Regardless of the size and distance of your tire, you need a plan – a retirement roadmap.
A retirement roadmap provides security by segregating needs from wants, and creates guaranteed lifetime income from retirement savings to pay the cost of needs for life; this is the foundation your plan. An emergency and growth layer are placed on top, to provide for unexpected circumstances, inflation, security, and legacy.