One of TCI’s founders and a personal mentor, Bob Swift, is many things, eccentric included. When he retired, the first big trip he planned was to a Green Bay Packers home game, in December. Packers games are played outside, and it gets cold in Green Bay during the winter. Yet, Bob had always wanted to go, so he did. For Bob, this was a perfect way to kick off retirement. For you, it might look completely different. The key is to ensure your retirement reflects what matters most to you.
As you approach your retirement years, it’s important to take stock of your situation. This includes balancing your lifestyle goals and your desire to leave a legacy to children, grandchildren, a nonprofit or others. At TCI, each Advisor is here to help you find this balance since your life is about much more than investments. We want to help you define what you truly want: an empowered purpose-filled life, a strong legacy, or something in between. As an Advisor, my purpose is to provide the structure, but ultimately, you decide what your ideal retirement life balance looks like.
The Five Factors That Shape Retirement Success
Finding the right balance between present enjoyment and future impact starts with understanding the five key factors that most influence retirement success.
1. When You Retire
This is perhaps the most important factor in determining your retirement plan’s success. The age at which you retire plays a huge role in how long your retirement nest must last. While everyone’s situation is different, today’s increased longevity generally means your nest egg needs to last longer
We generally urge you to be realistic in your expectations regarding how long your nest egg can be expected to support you in retirement. Life plans evolve over time, and everyone’s situation is unique.
Many people are retiring a bit later and continue to work at least part-time in retirement. This extra income, in addition to a well-built portfolio and proactive planning, can help stretch your savings and provide greater financial security throughout retirement. The age at which you retire directly impacts how long your savings need to last, making it a key factor in shaping a sustainable retirement plan.
2. How Much You Save Before Retirement
You should save what you can during your career leading up to retirement. When working with younger clients, I offer extra encouragement to save as early as possible because time is an investor’s best friend. This means participating in your 401(k) or other employer sponsored retirement plan to take advantage of compounding growth. The combination of your own contributions and any employer contributions can really accumulate over time, especially with a solid investment strategy in place.
My advice is to save 10% to 15% of your pre-tax income for retirement during your working years. That said, it is important to balance saving enough for retirement with enjoying your life during your working years.
3. How Much You Spend in Retirement
One of the critical planning steps we take with clients nearing retirement is to take a detailed look at what they are likely to spend on a monthly and annual basis in retirement. While planning is crucial, things can and often do change in retirement in terms of spending. For example, if you are in the early years of retirement, you may spend more on travel and various types of recreation while you are relatively young and in good health. As you age and move through retirement, your spending habits and spending levels might change.
Tracking your spending in the years leading up to retirement is a key part of the process. We then work with you to analyze your current lifestyle and spending compared to what you are envisioning as you move into retirement.
Ultimately, understanding spending patterns, both now and in the future, helps inform your retirement plan so it supports the experiences you want to enjoy while ensuring financial security for the years ahead.
4. How Long You Need Your Money to Last
This is one of the biggest unknowns in retirement planning. No one can predict exactly how long their assets will need to last, especially for couples planning together.
This uncertainty is one key reason why retirement planning never stops. We work with clients to help ensure that they have sufficient retirement assets throughout their years of financial freedom. We also factor in your wishes in terms of using some of those assets to leave a legacy to family or to a nonprofit.
5. Market Performance
Your asset allocation strategy is designed to align with your comfort level while optimizing potential returns. We review your portfolio on a regular basis and rebalance it, when necessary. We also review your target allocation periodically and adjust as needed for your changing situation.
Finding the Right Balance: Lifestyle vs. Legacy
Many retirees struggle with spending money and enjoying retirement versus maintaining a nest egg in order to leave a legacy. Some feel guilty spending their children’s or grandchildren’s inheritance. The reality is that often it’s the heirs that are the ones encouraging them to spend their money and to enjoy their retirement.
My advice when working with clients nearing or in retirement is to enjoy life within the limits of their wealth, but to focus on enjoying their wealth. At TCI, we encourage our clients to:
- Experience as much life and enjoyment as possible while your health allows you to.
- Be philanthropic. This can entail both donations of money, appreciated assets, or contributing your time and expertise to help an organization that you care about. Many nonprofits welcome the help of experienced people who want to contribute their time.
- Plan your estate to leave a legacy to loved ones, nonprofits and others.
Use your money in retirement intentionally. You have worked long and hard over the course of your working years. It’s OK to use your money to enjoy life in retirement. We want you to help you balance this with preserving your wealth to cover your needs over what could be a long retirement period, and with leaving a legacy to the extent that you want to.
Retirement isn’t about following a formula, it’s about designing a life that balances what matters most to you. In fact, success in retirement means different things to different people. Here at TCI, we believe that a solid financial plan is essential to helping make the right choices for your situation. We encourage everyone to be intentional when planning their lifestyle, their legacy and how the two best fit together for them.
