Pothole Planning for Retirement

Think about the last time you were driving around town. Were you wearing a seat belt? Whether you did, or did not, probably tells us a little about the kind of planner that you might be.  When you think about it, any kind of planning revolves around the premise that you should hope for the best, but plan for the worst. A planner will wear a seat belt, not because they expect to get into a car accident, but to mitigate the damage just in case they have one.

In the same way, we should enter into retirement planning optimistic that the economy, inflation, the stock market and our health all remain positive and that all will go smoothly and there will never be any hiccups during our golden years; but a good planner is also aware that they may not always be the case. So good retirement planning should focus not on what if all goes well, but also on what if things don’t.

At Secured Retirement Advisors, I often use an analogy which I call “pothole planning”. As any true Minnesotan knows, we really only have two seasons here in the Twin Cities: winter and road repair. As good Minnesotans, we all too familiar with what a nuisance a pothole can be. If you are aware of the pothole that exists, you simply drive around it. It may be annoying, but rarely does it cause any serious damage to you or your vehicle – as long as you have in place your plan on how to avoid it. It’s the unavoidable potholes that pop up out of nowhere leaving you no choice except to roll through it that can cause serious damage to your car’s front end or your lower vertebrae. While no one enjoys a pothole, it’s those drivers that have identified the potholes and a plan to detour around them that have the most success at keeping their cars and spines from being damaged. Those who never see the pothole coming, end up with real problems.

Comprehensive financial planning, and the advisers that go through this process with their clients, will complete the exercise of helping clients identify and develop plans on how to avoid their own unique potholes in their retirement planning. As you enter into retirement, you should be able to able to identify your contingency planning in the event of the following common retirement issues to determine if you are satisfied with your current pothole planning:

• Taxes are going higher: Identify strategies which can reduce taxation today and in future years.
• Replacement income for the surviving spouse: You or your spouse’s death will result in a loss of a social security check and often a reduction in pension payment for the survivor.
• Today’s retiree couple has a 50% probability that one spouse will see age 92: Will your money last that long and keep pace with inflation?
• In the metro area, a semi-private nursing home care averages $81,515 per year; in-home care runs $53,000 to $63,000 per year. Have you identified a plan for significant expenses which can result from long-term care?
• The markets will trend up, down or flat over the next several years: Your plan should not need a bull market to succeed.
• Run a stress test on your investment portfolio on a regular basis and re-balance as needed. Recall the retirees that thought that they were in a conservative portfolio in 2008 only to see a 30% drop in its value. If your advisor hasn’t suggested any changes to your portfolio given recent market volatility, maybe you should consider changing your advisor.

While this list is by no means complete, it does identify some of the most common areas of retirement planning that Secured Retirement Advisors sees neglected in our initial meeting with a prospective client.

A comprehensive process goes far deeper into your investment planning than just how to select your current stock, bond, mutual fund, REIT, or annuity you should own. So why don’t most investment professionals choose to provide holistic planning?Most advisers are transaction based and it is the sale of individual products which provides compensation, so that is where the majority of their time is spent. Our approach, and the other true wealth management approach utilizes a comprehensive planning process, is different.

In Secured Retirement Advisors’ offices, we call our initial consultation and discover meeting a 3-step review because we complete a thorough analysis of how a family can coordinate taxes, income and investments into the comprehensive retirement plan. If you would like a complementary “3 Step Review” of your own retirement plan, call Secured Retirement Advisors at 952-460-3260.