Do you Know “Your Number?”

The stock markets keep climbing the wall of worry. Your investment accounts may or may not be. Should you be worried? That depends. Do you NEED your accounts to be up as much as…

The stock markets keep climbing the wall of worry. Your investment accounts may or may not be. Should you be worried? That depends. Do you NEED your accounts to be up as much as the market? Can you survive the next time the market, and possibly your accounts, suffer large losses? Do you have enough money to take a conservative approach? Basically, do you know how to discover “your number?”

Most clients base “their number” on the projected amount of money they’ll need at retirement that will allow them to walk away from their job. Unfortunately, this is often where the planning stops, and they’re left with merely a snapshot at retirement that really only looks at the need during a single point in time. Many of the assumptions are based on the perspective of the client PRIOR to retirement, which in many ways differs once they are IN retirement, which can lead to unrealistic expectations. For example, assuming a given rate of return that one is comfortable with prior to retiring may not be realistic and comfortable during all of retirement; especially knowing that retirees commonly get increasingly conservative as they age.

Another reason the static and common method of determining retirement readiness is flawed is the simple reality of retiree behavior. As much as one may want to bounce their last check on their last breath, i.e. have JUST enough money to retire and precisely hit their number, I’ve yet to see a retiree in my 20 plus years of doing retirement income planning who has had the resolve to invade principal to that degree.

Also, it can take months, if not years in some cases, for clients to get comfortable in their retirement skin. Maybe every day being a Saturday becomes a bore and they decide to go back to work. Or, new grandchildren bring about change in travel plans from seeing the world to seeing them as often as possible. You simply cannot say with 100 percent certainty that you know what you’ll do in retirement until you actually have been retired.

Too much will change between when you retire and when your heirs inherit whatever is left. Deciding how best to coordinate pensions, social securities, qualified assets, and non-qualified assets, to name a few, adds another layer of complexity. Then add to that considerations related to taxes, estate planning and long-term care, not to mention market conditions and political and policy decisions, and the importance of conducting and updating the proper planning becomes even more critical.

Accumulating money is one thing, while sound wealth management is quite another. Money management platforms, brokerage accounts and risk tolerance questionnaires are a dime a dozen. But the independence, experience and expertise required to conduct the proper planning is not as commonplace. Unfortunately, as much as someone may like to have just a couple meetings right before they retire, look at a 30 page color print-out and say, “we’re all set,” it doesn’t work that way.

Done properly, “your number” is actually a moving target and a process, as opposed to a snapshot or specific lump sum of “x” amount of money. It needs to be adjusted as your needs and objectives change. Provided the most sophisticated resources are brought to bear, account values and subsequently your plan can be updated even on a nightly basis. The proper planning should be the basis upon which your investment decisions are made, not the other way around.

If you still don’t know the answers to the initial set of questions, and you look back at your retirement planning and it hasn’t been updated recently, you may want to look at your accounts differently. Instead of focusing on the colorful pie charts, the quarterly returns and specific investment products, look more closely at the planning, the assumptions and the breadth and quality of the discussions that accompanied them. Can you confidently say you know “your number?”

In actuality, “your number” is a journey, not a destination. “Your number” should be a process, not a static figure on a piece of paper and should be as unique as you are and adjusted over time. Your journey in life will change in many meaningful and rewarding ways, so perhaps your number should too.

Equanimity …. find yours.


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