Preparing for Retirement Checklist: Doing the Math!

Which leads us to the big reveal- will we have enough money to live the life we intend?

In the past few installments of this blog, we’ve been exploring the idea of a checklist of critical tasks to accomplish 5 to 10 years before retirement.  I’ve been using the analogy of the checklist an airline crew uses in preparing their aircraft for landing during the last few minutes of the flight.   In last month’s article, we considered the need to create an intentional and detailed vision of the unique retirement we want to experience.  So let’s assume you were successful and have your vision firmly in mind- now what?

Well, this leads us to a natural and logical next step which is to determine if our vision is financially sustainable.  This is the part where we calculate the future cost of our dream retirement and make sure that it can be supported by our financial resources.    Back in the day, this type of calculation required some “spread-sheeting” wizardry given all the variables to track.  But technology has provided us with tools by which we can model our retirement cash flow, year by year, in great detail.

And the value to this exercise is simple- its clarity.  If done well, we can eliminate much of the nagging angst we all experience when contemplating this significant but uncharted chapter in our life.

The projection will account for our future household retirement budget, bucket list purchases, travel, relocation, remodeling projects and gifts; everything that appears in our retirement vision will be found in our model-all adjusted for future inflation.  And then it will account for all our financial resources and their timing: Social Security benefits, pensions, investments, employer based retirement plans, continued employment earnings, real estate and inheritance- all based upon reasonable growth assumptions.

Which leads us to the big reveal- will we have enough money to live the life we intend?

Let me stop here and give some personal perspective from long experience as a financial planner.  This moment of clarity can be powerful- the proverbial light bulb of understanding flips on.  Sometimes it’s a pleasant discovery, and sometimes a rude awakening.  But even when the truth is unpleasant, it is incredibly valuable and here is why:

    • First, without getting too far into the weeds, it’s helpful to think of financial planning as a subset of economics. And economics is the social science that describes how people make decisions about finite (scarce) resources.  Since we can’t have everything we want, we must prioritize.  Through this analysis for example, we just may find that our goal of retiring early competes with our goal of traveling extensively.  We may have to modify one to experience the other.  Do we work longer or down size our dreams?  May be some of both.
    • However, the 5-10 years or so of preretirement runway gives us time to make course corrections. Often, these are high earning years and with the right corrective strategies, it may be possible to make up all or some of our retirement shortfall.  And there are so many variables that can be fine-tuned to create the optimal solution path.   A good technology tool will allow us to model the different “what if” strategies and help us choose the most efficient course of action.

At Level Financial Advisors, we dedicate a lot of time with our clients in creating these projections as well as designing the optimal strategies that solve or improve retirement outcomes.  We would invite you to learn more about our process and the value and planning resources we provide to our clients.

Winfred Jacob, CFP®
Senior Financial Advisor


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