People preparing for retirement may be wondering if they’ve saved enough. Those nearing or in retirement may be wondering if it will last. Perhaps the question on everyone’s mind, no matter where they are in the journey, is: “Will I outlive my savings?”
There’s a lot going on that can impact your retirement savings.
“The key to a successful retirement that can withstand economic challenges is to prepare early and review regularly,” says Sarah Hamlen, Thrivent financial advisor in White Sulphur Springs, Montana. “Creating the right retirement plan is a strategy and a science, and its where professional advice is important. The ‘water cooler’ doesn’t always have the right story, nor does it have the tools that we, as financial advisors, can use to project how any challenges can impact your plan.”
While guarantees in life are few, here are four actionable steps you can take, with the guidance and expertise of your
Develop your retirement goals
Whether your retirement date is nearing or you’re shifting gears in retirement, the first step always is to determine your goals.
“You need to focus on what you want your retirement to look like,” says Ben Carr, Thrivent financial advisor in Cedarburg, Wisconsin. “Retirement can mean a lot of different things to people; what do you want yours to include?”
Do you want to travel? Pick up a new hobby? Buy a cabin on a lake? Leave an inheritance? Articulating your needs, wants and wishes to your financial advisor can help make sure you create a retirement plan that is right for you, Carr says.
Write the goals in your head down on paper. It’s a step that can increase your chance of achieving them. While this doesn’t mean you can’t change them, it can help you create a more accurate retirement plan.
When Bob and Rosanne Schmidt of Brenham, Texas, met with Thrivent financial advisor Barney Loesch, also of Brenham, for the first time in 2019, this is where they started. Bob and Rosanne, both 67 now, were starting to consider their Social Security options, and they were seeking a financial advisor who could help them create a strategy for the long-term based on their goals, says Bob. Rosanne retired in 2019 and Bob in 2020.
“I wanted to have a personal relationship with the person guiding us with our finances, in case something happened to Bob,” Rosanne says. “We had an instant connection with Barney.”
The Schmidts had purchased some land, so some of their goals revolve around work Bob wants to do with the land to create a place for their children and grandchildren to hang out. A tractor to help with the work was near the top of the list. A boat. The couple also wants to travel.
“We had started saving as soon as we had jobs, so we were ready to get some things that many of our friends already had,” says Bob. “We never did without what we needed; we were both just frugal. But we knew that with our goals, we were going to have some costs up front.”
Run the retirement numbers
Once you have a good picture of your retirement goals, your financial advisor can help you do the math and guide you in positioning your assets to help make them last. Begin
“We’re really going to hone in on your budget and understand what you’re currently spending and what your future needs are,” Hamlen says. “We’re going to get as accurate as we can.”
You’ll talk through questions like: What do you need money for? How much will you need? When will you use it? You’ll want to keep in mind that most retirees have active years when they first retire, then slow down as they age. These are commonly referred to as the go-go, slow-go and no-go years. How much you’re spending and what you’re spending it on may change during these seasons of life.
“There are no prizes for turning in a budget that’s too low,” Hamlen says. “And if what you’re going to spend is off by 20% or even higher, that can have a catastrophic effect on your strategy.”
Hamlen, who serves the Schmidts with her business partner Loesch, reviewed the Schmidts’ portfolio with their goals in mind.
“Sarah did a lot of number crunching, looking at our investments, and started to fashion a plan with us on where to start taking money from first and what to hold on to,” Bob says.
Create the right retirement strategy for you
With budget in hand, it’s time to create a realistic spending and saving plan for retirement that takes into account economic challenges like inflation, market fluctuations and taxes.
It starts with paying yourself first and managing your cash flow for your living expenses. You’ll also want to start with a “rainy day fund,” a place from which to pull those living and
Social Security is one answer to the longevity question, Hussian says, because it’s one of the only potential guaranteed incomes sources you can’t outlive. You’ll want to work with your financial advisor to determine the right claiming strategy for your financial situation.
Flexibility is key, Carr says, referring to not locking all your dollars into one strategy. “You need a retirement plan that has guaranteed income to meet those daily living expenses, even if you live to 115,”he says.
But you also need to have assets that continue to experience market growth because, again, you may live long beyond what you might expect. This is where you may look at options like annuity products that can provide income for your lifetime, Hussian says.
You need a retirement plan that has guaranteed income to meet those daily living expenses, even if you live to 115.
You can’t just let your investments be buried in the basement, Hussian says. “You should take some risk to get returns that will allow them to offset the bite inflation, market fluctuations or taxes may take.”
You also may want to consider permanent life insurance, which provides your spouse with protection if you would die prematurely, but also can be an asset with efficient tax consequences that you can tap into in the future.
Rosanne Schmidt started drawing Social Security at 67. Bob Schmidt is waiting until 70. They made the
“Based on Sarah’s analysis, we have money to spend right now, so it made sense to wait and increase what we’ll receive later,” says Bob, especially if he would die before Rosanne.
They did buy the tractor, and Bob has put it to good use, especially since the pandemic slowed their travel plans. But they’re hoping to start traveling soon. “It’s in the budget; it’s just a matter of when we can start using it,” Rosanne says.
Reassess retirement goals regularly
Your retirement strategy is not a one and done deal. Whether pre-retired or already retired, it’s essential to meet at least annually with your financial advisor. That’s the general rule, but with inflation and market fluctuations, it’s even more important.
And if you’re making financial decisions that aren’t consistent with your retirement plan, you may need to talk with your financial advisor sooner as it may be time to change it or increase your risk of running out of money.
“You have to be open to receiving advice,” Hamlen says. “You’re not just planning for the first couple of years; it’s planning for the long-term. Retirement is a process, not an event.”
While inflation is a concern for the Schmidts, “we don’t worry too much about it,” Rosanne says. “We meet with Barney and Sarah twice a year to re-evaluate our plan and will make changes if we need to.”
Bob says he appreciates the approach of his Thrivent financial advisors. “For years, before meeting Barney in 2019, we had investment advisors. Now we have financial advisors, people who look at your total financial picture to help you develop a plan. There’s a difference.”
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