Controlling the Flow During Retirement

Controlling the Flow During Retirement 

During your working years, your retirement planning is fairly straight forward. The name of the game is to earn money, set it aside and nurture it to make it grow. Usually, the bigger your pool when you retire, the better. The job of a financial consultant is to help you find ways to achieve that goal of filling the pool. 

About five to seven years before retirement, the game starts to change. You start looking at releasing some of what you’ve poured into the pool. Your strategy becomes more like operating a reservoir dam. You need to let some water (money) out. How much and how fast is a tricky decision. You want to let out enough so that life downstream can remain healthy and vital. 

You also have to look upstream from the dam at what’s filling the reservoir. During your working years, your income did most of that. During retirement, salary and wages have dried up, so to speak. What other sources – Social Security, inheritance, income from investments – will be flowing into the reservoir? What could threaten those sources, reducing them or causing them to disappear entirely? 

Between the inflow and the outflow is the reservoir, or the water reserved for possible drought. You have to balance the amount coming in against the amount going out to keep the reservoir at a safe level. If inflows decline, you may need to slow the outflow to avoid draining the reservoir too soon. Someday, you will turn the reservoir over to the next generation. How much do you want left in the pool when that time comes? These legacy desires will also impact how much you need to flow in and how much you can allow to flow out. 

The job of a Certified Financial Planner (CFP) is to serve as sort of a civil engineering consultant for your reservoir, helping you find the cracks in the dam, looking for additional sources of inflow, and monitoring outflow to avoid prematurely draining the pool. Part of the partnership relies on keeping both sides aware of conditions affecting the dam and the life surrounding it. It is important that you keep your CFP up to date on any changes that might affect your reservoir, as they may be able to share with you some ideas on how to maintain the balance you want in retirement. 

FINANCIAL FACTS 

Get Your Own Place – As of today, there is an average of 2.6 people in every American household. There are 121 million households nationwide (source: Census Bureau, BTN Research).  

Cost Of Doing Business – Sixty-nine percent of the total employee cost that an employer pays in the private sector is for wages and salaries. The other 31 percent is for the various benefits that are either legally required (e.g., Social Security) or are simply provided to attract and retain workers, including insurance, retirement plans and paid leave (source: Department of Labor, BTN Research).    

Big Bad Bank – The largest commercial bank failure in U.S. history (Washington Mutual) took place on Sept. 25, 2008, or four years ago. Washington Mutual had assets of $328 billion at the time it failed (source: Federal Deposit Insurance Corporation, BTN Research).