How to Test if Your Retirement Plan Will Work or Fail
The good news: Most people have a retirement plan.
The bad news: Their plan leaves them broke 10 years prior to their life expectancy.

The most common question we hear from men and women in their 40’s and 50’s is, “How much money do I need to save in order to have a comfortable retirement?”


Many investors believe there’s some magical number that guarantees they will be set for life financially. I suppose there is such a number – but it’s so large that for 99% of us, it might as well be fairy dust.


How much you need to get through retirement depends on your lifestyle and how much you spend or need each year. Do you consider a day incomplete without sampling a fine Barolo? Or is your idea of retirement moving to the sticks and living off the land? How long will you live? Was your grandmother still weeding the garden at age 95, or is your family longevity-challenged? How much do you want to bank on Social Security? What’s on your “bucket list”?


I could list 20 more questions. But for simplicity’s sake, let’s say you determine you need to replace 80% of your current salary in retirement.


A new perspective on retirement planning…

Let’s imagine you’re 45 years old and want to retire at age 65.  If your current income is $150,000, for example, 80% of that means you’ll be living off $120,000 a year in today’s dollars. Let’s peg inflation at 2.5% a year and say your account grows at 5% per year. You’ve managed to accumulate $200,000 in your retirement account and you’re adding $15,000 every year to it. (I’m not going to factor in any help from Social Security. And I’m not going to factor in any major expenses such as college tuitions.)


We use a cool piece of software called Retirement Ready or Not that lets us run endless “what if?” scenarios about retirement. When I plug in the above assumptions, the software tells us…


… You’ll be out of money by age 71.


But wait, you say. I can do better than a 5% return. OK, let’s run it again. At a 7.5% growth rate, the money lasts only four more years. To make the money last until age 85 requires an 11.87% return rate. (If you know where to get 11.87% for 40 years—guaranteed—please contact me immediately.)


As you go through this exercise, what you find is that the assumptions matter. But what’s interesting is that some assumptions matter much more than others. For example, increasing the growth rate by 50% only bought us four more years. It shows that chasing after rates of return is not the answer.


So, what to do if you’re in a similar situation to Joe Sample above? It’s time to get a serious retirement plan in place. For starters, that means saving more, increasing income and employing investment tools that allow you to access your savings tax-free instead of taxable.


“How do I make sure I don’t outlive my savings?”

The biggest mistake I see men and women make is not thinking about how they would live in retirement until they are close to it. This type of financial planning has to be done years in advance of your goal.


That’s where our 2nd Opinion Retirement Review can be helpful. If you have a plan, it’s a good way to do a quick audit and see if you’re on schedule to meet your goals. Where are you safe? Where are you vulnerable? What percentage of your savings is guaranteed to be there? What percent is at risk, vulnerable to swings in the market?


If you don’t have a plan, it’s an easy way to get started – to put a foundation in place to secure your well being, and the future needs of your family.


Here’s what to do next

If you’d like to get a free second opinion on your retirement, simply fill out the request information on this page. We will contact you with next steps. Your privacy is assured and your private information remains confidential and secure at all times.




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