8 Tips for Building a Useful Retirement Plan

Everyone knows that they need a retirement plan. But that means different things to different people. Many think of a plan as merely retirement savings. And, while retirement savings are extremely useful, we believe that they are only one aspect of a useful retirement plan. (After all, some people do retire on Social Security alone.) A useful retirement plan is a holistic guide or roadmap for what is going to happen with every aspect of your financial life. It goes way beyond savings and investments to account for everything that might impact your money and way of life. Here are 8 tips for building a useful retirement plan – one that’s not just a hefty stack of paper with pretty (though perhaps confusing) graphs and charts.

1. A Useful Retirement Plan Is Comprehensive

Your savings and investments are only one aspect of a comprehensive and useful retirement plan.  In fact, ror most people, Social Security benefits, home equity, retirement jobs, or even good health are actually more financially valuable than their savings accounts.  Therefore, it is critically important that your retirement plan looks at everything that will impact your financial well being. Inheritances, how much you spend, inflation – and so much more – are also hugely important considerations. The Boldin Retirement Planner is the most comprehensive and powerful tools available.  Forbes Magazine calls the system “a new approach to retirement planning” and it was named a best retirement calculator by the American Association of Individual Investors (AAII).

2. A Useful Retirement Plan Is Something You Can Understand

There are so many hugely complicated parts to a comprehensive retirement plan.  If 1) someone else does the plan for you, 2) you use a simple retirement calculator, or 3) just try to do mental arithmetic, you are not going to fully appreciate the details. Whether you work with a financial planner or not, it is a great idea to have a place where you can manage and track all the details yourself.  When you create your own plan and really engage in the process of planning, you gain more insight into how big and little decisions will impact your future. Furthermore, you can begin to see how your finances will play out. And, you will start to make more informed decisions.

3. A Useful Retirement Plan is Completely Personalized

Rules of thumb are great short cuts. But, they are not useful. They may (or may not) apply to you. For example:

• Not everyone needs a $1 million to retire.
• It is not always accurate to say that you will only require 80% of your pre retirement income when you retire.
• And, the 4% withdrawal rate is being widely questioned.

You need a plan built around your resources, values, priorities, and goals.

4. A Useful Retirement Plan Combines Professional Help with Do It Yourself Tools

Good online retirement tools,  professional retirement advisors, and other financial professionals are not mutually exclusive. In fact, they often actually complement each other.  Research shows that many people don’t trust their financial advisor or even their banking institution.  The source of that distrust is usually rooted in not understanding why they are supposed to do whatever it is the advisor is suggesting. If the client has a good understanding of their own financial situation (often gleaned from good online tools), then they are more likely to understand why an advisor might make certain recommendations. On the other hand, using a retirement calculator may illustrate places where someone needs more help — from a professional.

5. Your Retirement Plan Needs to Be a Living Document

A useful retirement plan is not something you spend an hour or two on at one time.  It should be easy to get started but you need to spend significant time exploring and playing with all of your options. In fact, this is one of the biggest complaints that people have about a formal written dossier about their retirement; they can not easily make changes and try out different strategies. Never mind the fact that things change. Retirement planning is not something that you do once and forget about forevermore. Use retirement tools and resources that enable you to make updates at least quarterly and whenever anything about your finances changes.

6. A Useful Retirement Plan Helps You Make Necessary Trade-Offs

Life is messy.  You have competing priorities, values, interests. When you first gather all of your financial information, it is unlikely that you will have documented your perfect retirement plan.  It is likely that you will need to make some adjustments and even assess trade-offs. Here are some important questions to consider:

• Do you want to retire a little earlier and spend a little less?
• Do you want to downsize and afford more travel?
• Do you want to guarantee adequate income or go for high returns on your investments?

7. Your Retirement Plan Needs to Be Able to Serve Different Purposes and Different Stages

Your retirement planning goals are hugely different before you retire and when you are retiring or already retired. Before you retire, your goal is about amassing and growing the maximum amount of savings in the most efficient way possible. When you are retiring, your concern becomes how to continue growing while also spending those hard-earned resources in the most efficient way possible.

8. A Useful Retirement Plan Helps You Make Decisions and Track Progress

Building a retirement plan is only part of the equation for having a useful retirement plan. A useful retirement plan is one that enables you to research and learn more about different topics then go back and try different things with your newfound insights. You also want a retirement plan that helps you to make decisions and actually take the actions that are necessary for a more secure future. Building a retirement plan requires some use of assumptions: things that are accepted as true or as certain to happen but without proof. When planning, you need to make guesses about inflation, how much money you are going to spend and so much more. However, some online retirement planning tools (and even some financial advisors) use a greater number of more general assumptions than other resources. To have a useful retirement plan, it needs to be as personalized as possible.  For example, many retirement planning resources base their projections on the assumption that the retiree will spend 70% of their pre-retirement earnings in retirement.  This may be true for some, but it is definitely not true for many others. If working with a financial advisor, ask to see the assumptions they use for your plan.  If you are using the Boldin retirement planner, you know that you get to control an ever-expanding list of details and you can always click on the “assumptions” link to review the additional data used by the tool.