It’s a question we often get: How much should my Investment Plan have in it when I retire?

Well, it depends.

It’s a good question and one you really need to have an answer to before you retire. Without knowing this number and just winging it—well, I don’t think anybody recommends you do that. Pull the trigger, retire too soon with your spending more than your plan can handle, and it could be a disaster.

So how do you figure it out, and what do you need to consider? For example, what are the realistic and safe assumptions you should be using around things like inflation and returns going forward? Where are the unknowns that maybe you should be accounting for but hadn’t thought of?

Let’s dive into it. I’ll show you all the things we consider and how we come up with that number when we’re asked the question.

Ideally, it all starts with knowing where you want to be, what you want to be doing in your retirement, and what the retirement picture looks like that you want. Then determining and understanding clearly where you are now, where you need to be to make it all happen, and what that gap looks like.

Now, it might be that you do have a pretty good idea of what you want your retirement picture to look like, but life is throwing stuff at you that is forcing you to maybe move your timeline up against your will.  That’s OK. In your case, then, it’s more about reverse engineering. Figuring out, based on what you have, where are the boundaries? How do you maximize a retirement picture based on what’s available to you?

Factors to Consider

There’s plenty you need to consider here and factor into your picture. Besides your Investment Plan, what other assets or benefits come into play? Any military or VA benefits? Benefits from other jobs you’ve had? Are there IRAs or Roth IRAs in the picture? How does your deferred comp factor into this? And where’s the optimal point to start Social Security? Do you pull that trigger as early as you can, or do you wait? If you’re married and your spouse has benefits, does that affect what you do with yours?

And sometimes critical, and can make a big impact, is your age. Particularly if you’re less than 59 ½, as most of you are when you retire. And if you’re less than 50, what you do can be very different if you’re 49 vs. 50, and we’ve seen big mistakes happen here.

Another area that needs special attention is your liabilities. What does your debt situation look like, if there is any? Will you be keeping some debt in retirement, like mortgages or car loans? Or should you find a way to pay those off? When does the debt fall off? What are you paying for it? All of that factors in and is important to consider.

And the thing that is most neglected and perhaps least understood that can ruin long retirements if you don’t account for it is inflation. The effect even just nominal inflation has on a multi-decades-long retirement can be devastating, and you need to account for it. This takes some thought and a good understanding of how inflation affects a retirement lifestyle, especially with medical care, and it takes a lot of discipline in your plan.

Get Help?

With so much to consider and so many rules you need to follow, especially in the tax code, does it make sense to get some outside advice on this? Well, of course you know I’m going to say yes. That’s what you’d expect me to say, doing what I do for a living. But think about it for a minute. I know the reason why those that don’t seek help typically keep this to themselves—it’s often because they are skeptical of advice. That it’s really masked so that the person giving it has the opportunity to sell you something, like a life insurance policy or annuity or whatever investment scheme they sell.

I have one word for that person: fiduciary. Only get your advice from someone who doesn’t profit from selling you something. Who isn’t biased and tainted by what they have to do to feed their family. Who has a fiduciary obligation to do what is in your best interest over their own. And you don’t get that from somebody that sells you products. There’s not a lot of us that are out there who don’t accept any commissions for selling any products and don’t have that hidden (or sometimes not-so-hidden) agenda. But it’s worth the extra effort to find them. If you’re searching for an advisor, make sure there’s at least one “fee-only” (not fee-based) advisor in your search that you can interview.

One of the advantages of working with a real financial planning professional is their insight and experience, as well as their access and understanding of the sophisticated software that can model your specific scenario—modeling changes you’d like to consider and even come back to you with tested probability scores to success. This gives you the confidence you’ll need to enter retirement without the anxiety of wondering if you’re going to be financially successful or not. You’ll have that number and the peace of mind it gives you knowing you’ll have a great retirement experience. That’s what it’s all about.

Want to see what that experience is like? It all starts with your call. I think you’ll be glad you did.

Thanks for watching, thanks for what you do for the rest of us, and stay safe.