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For nearly my entire career, I have focused on what it takes for someone to retire successfully and most important, enjoy a happy and secure last third of their life. I have seen many people who are happy and fulfilled with their retirement lifestyle. These folks are living their “American Dream.” I have met others who have stopped working and are technically retired, but they are stressed out and unhappy with their lifestyle. What is most interesting to me, their happiness does not appear to correlate with their net worth!
Are You Working With a Retirement Income Certified Professional?
In my efforts to always strive to improve people’s happiness and financial security, I have recently begun to study for another designation to complement this work. I am studying for my RICP, which stands for Retirement Income Certified Professional. The curriculum is not just focused on financial considerations, but personal and emotional considerations as well. There is a particular focus on an individual’s happiness and satisfaction, not just on paying the bills, which is why I was attracted to this particular certification.
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How to Create Income
When I was younger, I would explain to clients that I focused on strategies for wealth building and accumulation with an eye toward consumption, or turning that wealth into dependable, predictable income streams.
There Are Only Two Ways to Create Income:
• You at work
• Your money at work.
There are no alternatives. All too often, I encounter people who are poorly positioned to make that transition. It’s like this concept of retiring snuck up on them and that led to the anxiety of answering the question, “What do I do now?”
It’s Time to Make Some Financial Decisions
You want to answer the questions sooner than later. The longer one waits, the fewer the options that will be available. I have had a number of clients referred to me in the last few years who were distraught because they were running out of money and were going to be forced to sell their life long homes. After getting to know about their situation and how they got there, I started to see certain patterns emerge, and most of their frustrations were as a result of following the conventional wisdom.
What Are the 5 Common Myths and Misconceptions About Retirement Planning?
1. You must save up millions to retire comfortably. Remember the ING commercials from a few years ago that asked, “What is your number?” There were all these people with numbers in the millions tucked under their arm. Many saw that and just gave up. Still others have millions and still feel stressed over outliving their money. The focus in retirement is all about income, not wealth!
Action step: Once you understand this, everything else can fall into place.
2. You must maintain significant assets in the stock market to beat inflation. There are a lot of ways to plan to keep pace with inflation. How does the market help with that when it drops 15%, 20%, 25% or more? If you are about to retire, or recently retired, you cannot afford to stress your portfolio with losses like this.
Action step: You must have a plan that addresses inflation, but the stock market isn’t for everyone!
3. Defer taxes as long as possible. This one can really wreak havoc on one’s retirement. Thanks to the Tax Reform Act of 1986, retired people pay the highest effective tax rates of any segment of our population. Remember, the longer you defer taxes, the more uncertainty will arise as to how much you will have to pay. With our national debt on the rise, many pundits believe taxes could rise substantially in the future. I was referred a client who spent all of their already taxed accounts, leaving them only with their IRA’s and 401k’s and once they figured out how little they would get to spend from their withdrawal, they had to reduce their lifestyle in order to not run out of money too soon. Consuming your assets in the wrong order or mix can dramatically reduce the number of years your nest egg lasts!
Action step: What you really need is a plan to create the maximum “net spendable income” for your lifetime.
4. Retirement is when you stop working. A lot of people approach their retirement as a time when I won’t be working any more. They will have lots of time to relax and enjoy their life. What really happens to those folks is they become bored in fairly short order. I find this to be particularly true for people who lost jobs or businesses before they thought they would be retiring. That boredom, can lead to general dissatisfaction that has led to increased drinking, divorce, anger, and depression. Not exactly the happy vision most of us hold of our future. It is of critical importance that you have a lifestyle plan for retirement happiness. Will you be going back to school, doing volunteer work, or gardening? Do you want to learn a language and travel? These are but a few of the things my happiest retired clients are doing. I encourage you to take some time and “paint your picture.”
Action step: If you have a good idea of what you want your life to look like in retirement, you will have a much easier time making decisions and plans to fund your retirement income needs.
5. Planning a happy fulfilling retirement is easy; anyone can do it on their own. There are many pundits that suggest you become a “do it yourselfer” for planning your successful retirement. What many don’t realize is that creating a holistic plan that will last a lifetime is a very complex endeavor. You have to be able to do much more than manage a portfolio or buy a product. From taxes to health care, there are dozens of topics that must be accounted for in retirement. There are many issues that can derail your future financial security. Take risk management for example. What if, after building your nest egg, you got sued over a car accident? What if you got sick or developed Parkinson’s or another debilitating chronic condition? What if the stock market dropped in half? What would you do? How long would your money last? An advisor can help to identify these areas of vulnerability and to help create a plan that deals with those issues.
Action step: It is very stressful to have to figure out and deal with these issues as we get older. Now is the time to seek help from a Retirement Income Certified Professional.
I Think I Need Help with My Retirement Planning
So what kind of advisor helps with this stuff? After all, most people who refer to themselves as financial advisors are really investment advisors. To be able to identify advisors that can help in these areas, ask your advisor how they would approach or address some of the issues I mentioned above. You will find out pretty quickly if they have the expertise you need to help craft your plans. Or you can take a moment to set up a conversation with us about how you can cut through the noise and create the future of your dreams.
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