It takes more than planning to bring a goal to life.
We’ve all been there—setting a goal we really want to accomplish, but somehow, we don’t ultimately see it through. From exercising more to saving for dream vacations, our lives are full of aspirations that we never bring to their fruition. Whether it’s due to a miscalculation of the time involved, lack of will power, or unexpected setbacks that are out of our control, sometimes the best laid plans go awry. When it comes to planning for retirement finances, we want to get it right out of the gate. But while you’re busy stashing cash in your IRA and maxing out your 401K plan contributions, it’s a good idea to take a holistic view of your planning and examine it from all sides. Retirement planning is actually as much about taking your lifestyle into consideration as it is about money. When you think about the factors that play into your daily life, is the financial plan you’ve assembled appropriate for your needs? By examining some of the most important aspects of your savings strategy, you can put a plan in place that is ‘able’ to meet your needs and allows you to achieve your financial goals.
Ensure that it’s attain-able.
Your high school reunion is a month away and you decide you’re going to lose a few pounds for the big event. Losing ten pounds is probably achievable. Twenty-five pounds is unlikely. Fifty pounds isn’t going to happen. The same holds true for your retirement. If you’re planning to retire in five years and your goal is to save a million bucks by then, that goal may or may not be attainable. It depends on a number of factors, such as your income, your investment strategy, and how much, if any, you already have in your nest egg. If you find that you’re falling short of your goal, you need to make some major changes or adjust the number you’re striving to reach. Saving more diligently and staying on the job longer, for example, can help you close in on your financial goal.
Did you know that healthcare will cost the average healthy 65-year-old couple today $400,000 or more in retirement? And that doesn’t even include the massive costs associated with long-term care. Add the fact that most people underestimate their longevity in retirement, and there’s a good chance of falling short in capital down the line. So while you might see a healthy-looking number in your retirement fund, you need to make sure it will carry you through the additional expenses you're likely to face in your later years and the longer life you may live. That might mean postponing retirement for a year or two, making adjustments to your lifestyle plan, or assuming an encore career.
It is live-able?
Adopting a livable approach to retirement planning calls for implementing strategies that won’t make every day torturous in order to reach your end goal. While saving for retirement is smart and necessary, it shouldn’t mean eating ramen noodles every night. Do you want to deprive yourself of every pleasure in your present life just so you can sock it away for a utopian lifestyle in your senior years? Most likely, you want to be able to have a little fun along the way. Your retirement strategy needs to reflect that. As you budget funds for standard expenses like the mortgage and utilities, add in some discretionary money for travel, dining, entertainment and other non-essentials. You can still get where you want to go financially, and you’ll also enjoy the ride.
Make it flex-able.
(Yes, we know it’s misspelled, but we’re keeping with the theme here so please bear with us.) While you can control some aspects of your financial plan, many things remain uncontrollable. The market might take a dive. Your health could take an unforeseen setback. Your cash flow may increase—or decrease—unexpectedly. Even with the best plans on paper, life has a way of happening. While your well-constructed retirement strategy probably doesn’t need an overhaul, it does need to be flexible. Set an achievable goal and then monitor the major conditions that influence the outcome. Have contingency plans in place, be pliable, and adapt when necessary.
The best strategic retirement plans start with a formal process and incorporate a realistic life plan that takes into account all of the above variables. Once you have a plan in place that can be successful, it can become a living document. Work with your financial advisor at least annually to reaffirm and reassess where you are relation to your goals.
Do you need guidance creating a meaningful, realistic retirement plan that’s ‘able’ to live up to your expectations? Our knowledgeable advisors are here to help. Please contact us to learn more.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.