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A few years ago, during a conversation with my brother about my career in the financial planning profession, I was asked, “How much money do I need to retire?” At first, I was a bit dumbstruck and almost shocked at the murkiness of the question, and yet how simple and direct it was.

I wanted to be able to give an answer but didn’t have enough information to give an accurate figure. I was conflicted on how to answer with such little information. Details such as:

  • Age at retirement?

  • What are current expenses?

  • What is the expected standard of living in retirement i.e., how much in yearly spending?

  • How long to plan for/life expectancy?

  • Current income and expected retirement income (SS income, Pension, Annuity)?

  • Amount of existing retirement savings and current savings rates?

Among all these questions there is still the high likelihood that there are additional goals, expenses and expectations that I was completely unaware of.

It felt like I pondered about the question for 10 minutes, lost in thought on the details. But, after what I’m sure was only a brief pause, I sincerely said, “I don’t know, I can’t answer that yet”.

It is a legitimate question to ask, “How much do I need to retire?” But the answer isn’t as effortless as the question.

A recent Gallup poll conducted April 1-14, 2020 concluded that the most common concern people had about their financial situation was “Not having enough money for retirement”, with 59% of respondents indicating a degree of worry.

Developing a detailed financial plan is key to finding the comfort to retire confidently on your timeline and to be able to live your expected standard of living. Creating your financial plan isn’t a one-time deal. It needs to be reassessed regularly (at least once per year) to make sure you are staying on track. As Dwight D. Eisenhower said, “Plans are nothing, planning is everything.”

According to a recent study by David Blanchett, head of retirement research at Morningstar, and Warren Cormier, executive director of the DCIIA’s Retirement Research Center, 75% of households reduce their spending in the first 10 years of retirement. Potential reasons indicate concern about uncertain life expectancy, desire to leave a bequest, and data also suggests that many are “right-sizing” their spending early in retirement to better align with available resources.

Many people think of financial planning as simply figuring out “How much money do I need to retire?” In reality there is more to plan for than just retirement. Planning includes utilizing as many of the tools needed in order to achieve your goals. These tools include:

  • Investment expertise

  • Tax planning and tax minimizing strategy

  • Estate planning and asset titling

  • Risk mitigation

  • Business structuring and succession planning

  • Retirement income planning

So, in response to my brother, don’t let the response of “I don’t know, I can’t answer that yet”, deter you. It validates your concerns and indicates your need for financial planning.

It is healthy to care about your financial future and there is no better time to start developing your financial plan than now. It should be unique to your scenario and constantly evolving with changes in your goals and needs. If your scenario has changed or evolved, then now is a the time to update your planning with your financial planner.

– Doug Peterson, CFP®, Financial Planning Specialist

To learn more about the author of this article Doug Peterson, CFP®, visit: https://www.adamswealthadvisors.com/doug-peterson-profile. Or connect with him on LinkedIn: https://www.linkedin.com/in/douglas-peterson-cfp%C2%AE-4117315a/.

Disclosure:

Adams Wealth Management is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

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