Are You Avoiding Retirement?

Benjamin Haas |

What are the most common questions that people come in with? 

There’s really one main question that comes to us, but it comes in many forms. We will hear “did I save enough?” or “I’m worried about healthcare expenses” or “the stock market makes me nervous and I can’t afford to lose anything.” But really what they are asking is “will I run out of money?” And that comes from clients who have $500,000 and also clients who have $25,000,000. When people stop working and the consistent paychecks stop coming, the mind doesn’t just flip a switch. There’s doubt and there’s concern for the unknown. So, our number one goal is to give people confidence as they move into retirement. To assure them things will be ok, to educate them on why, and to show them interactively how they can make retirement work for them. Along the way the other common questions get answered too, like “how should I elect my pension” or “when should I take Social Security.”

What are the misconceptions about what we can do and where we can help them? 

Notice none of those questions are what large cap fund to pick or how their alpha compares to the S&P 500 or what stock looks good right now. Often times it’s the ADVISORS that are the ones trying to get their clients to focus too much on investments and allocations and the products they offer but that’s not how retirement planning should go. That’s not what matters to clients, at least not the clients we work for. A lot of our job is putting the puzzle pieces together for clients so that we can help them try to be as efficient as possible with what are now finite resources. What I think gets lost in “retirement planning” are how decisions domino. For example, a client wants to retire early at 59.5 years old because they were awesome savers and don’t plan to live a lavish retirement lifestyle. Without Social Security and Medicare, where will income and insurance come from? If much of the savings is in retirement accounts, how will taxes factor into the plan? If they decide to keep working in some smaller capacity, will it pay to wait to take Social Security? Should they pay off the mortgage? Have the youngest child start to pay back the student loans? Purchase long-term care? Advice should be personalized and specific to their circumstances, and I think some consumers believe one size fits all – that advice can come from Google or the water cooler, or their really smart brother-in-law.

Recreating the paycheck and understanding expenses is a really big piece.

Who knows where life will take you and how things will change? “What Am I Going to do All Day?” may dictate new spending habits. Cashflow analysis is really important and making fair assumptions is really important. We dive really deep into analyzing the history of Social Security’s COLA, of what Medicare expenses, deductibles and COLA are. We talk about different “buckets” of expenses to get people to really think about what they need vs. what they want and how building a buffer into those planned expenses is so key. I just truly believe that any advisor out there can make a financial plan look good or look bad by changing these numbers a bit, either to sell something they want to sell or to avoid having a hard conversation with someone and saying “this plan isn’t working yet, we have to consider some changes.”  It’s really important to make honest assessments about what expenses will be and how paychecks will be recreated through fixed income resources and investment/savings income to fill those gaps. It’s equally important to recognize that Social Security and pension income (which often does NOT inflate) will play a smaller and smaller role in those paychecks as one ages, making it all the more important to have adequate savings.

Social Security election.

Social Security can be a stumbling block too. It’s pretty common for clients to look at a Social Security statement and quickly have a feeling for whether they will elect as soon as they can or wait. But there’s a lot of analysis we would do and a couple questions we would ask. Such as:

  • What other income will you have to support you if you wait?
  • Is that income taxable, such as a retirement account?
  • How’s your health and your view on longevity of life?
  • Do you plan to work while collecting? To what degree?
  • Are you married? What is their earning history? Did you used to be married? For how long? Did a spouse pass away?
  • How will benefits change if you stop working but wait?
  • How will working part-time help your delayed benefit?
  • Will Social Security be taxable to you? To what extent?
  • Ultimately, what’s your breakeven age – the age you would have to reach where it would have paid to wait to collect Social Security.

I guess that’s more than just a couple questions!

How we get paid.

Our job is to be a financial head coach and to give personalized advice and always put your best interest ahead of anything else that may compete with that. To do that, we want to be paid like a coach or a consultant – a flat fee for our time commitment to you, your plan, and the process of putting that plan to work! We are an office of CERTIFIED FINANCIAL PLANNERSTM and are committed to the standard of care set forth by the highest expectations in our industry.

What about investments?

Yes, investments matter and we can act as your investment manager as well but this should not precede the financial planning process. Once we complete your financial plan and understand your income needs and your feelings on risk and return, we put your money to work in what we call our “Three Bucket Theory.”  This bucketing idea is built to help you withstand short-term moves in the market. If you hold an appropriate amount of cash for short-term needs, wants and wishes, then the stock market returns over a year or two will not affect your retirement paycheck. Similarly, if you hold enough in a short-term bucket, with investments that produce an adequate amount of income to replenish that cash, then you will not have to cut into your principal in a down market. Finally, if you commit to holding growth-oriented investments with the remainder of your assets, you can take gains when they occur but allow that bucket to recover during periods of difficultly. This all rolls up into a tool we use called Riskalyze that quantifies (in dollars not percentages) what you hypothetically could lose and gain over short six-month periods. When we define your strategy, we suggest you use this tool to not only confirm your current feelings on risk but also assess the risk associated with your current holdings at points of inflection in the market. You might be surprised what you will find out about yourself and the potential outcomes of your investing.

Is financial planning an ongoing process?

It sure is! Life will change. People change, relationships change, needs and wants change, the world around us changes constantly. That all warrants review and consideration so we monitor plans quarterly but goals will change too. As the retirement plan settles into place, the next stage in life brings new challenges and considerations: estate planning. We start to think about legacy goals, what can, should, will or won’t be left behind and how-to efficiently pass assets. These decisions take a lot of time, so we commit to starting with education and deeper dives into what really matters most to our clients and why. It’s all a part of aligning their values, vision, and wealth – over and over and over again!


Want to learn more?  Check out some additional resources we put together on retirement, Social Security, and Medicare:

Planning For A Secure Retirement with the Millers

The Millers are almost empty nesters who are ready to start focusing on retirement. They are looking forward to the freedom that retirement will offer as they transition from claiming dependents and commuting to and from work every day. They feel as if they’ve built a good foundation, but struggle to navigate the last phase of college expenses, caring for aging mothers and their own retirement goals and would rather pay a professional to review their strategy thus far. The Millers need someone they can trust and prefer a close working relationship with their financial planner to collaborate with the other professionals in their life. The Millers have done a good job saving, spending within their means which is the foundation for a secure retirement. We even explored the possibility of them both retiring early and showed them what it would require doing so.

Ep # 39: Making The Early Retirement Leap? Healthcare Costs Aren't Cheap!

Retiring early sounds wonderful, but have you ever thought about how much healthcare would cost if you chose to say goodbye to work before age 65? People often forget that they need healthcare coverage to fill the gap until they become eligible for Medicare and it’s not cheap! Listen to Ben and Adam recall recent client conversations and discuss what to expect if you choose to retire early and need to find healthcare coverage on your own.

Ep # 34: Attaining Confidence In Your Medicare Elections With Anthony Minetola

Listen to Ben interview Anthony around the thing he knows best: Medicare. Together they explore key components to consider, elements that factor into your coverage options, when and how you can make changes, and other questions you may want to ask prior to making a decision.

Ep # 28: What Does Financial Independence Mean To You?

What does "financial independence" mean to you? Is it a level of wealth where you don't need to work? Is it reaching some desired future state? Is it confidence when certain financial stressors are eliminated? Listen to Adam and Ben give their take.

Ep # 25: Why You Should Pay Attention To Your Pension Election

Pension election is an irrevocable decision that has lasting effects, which may or may not be good in the long run. In this episode, we share some of the high level of conversations we've been having recently and things to keep in mind before making the big decision.

Ep #24: Securing Your Retirement Parachute

Retirement is a process. Give yourself time to get used to the idea, both before AND after your retirement party. It's normal to feel a lost for a while, trying to find purpose again. You'll get it back as you start to work towards new goals and redefine what matters most to you. Having walked countless people through this process, we're more than qualified to provide financial guidance. Yet, being financially prepared and feeling financially secure about retirement is only part of the battle. Listen to Adam and Ben discuss how you can find your purpose and figure out what you will do all day.


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