10 Key Ingredients to a Successful Retirement Plan

The 10 “Key Ingredients” to DEMAND from a Financial Professional in a Successful Retirement Plan!!

If a client is working on their retirement plan, it is very likely they have not only personal goals and dreams, but also a minimum level of expectations from their financial planner.  Heck, the truth is, a client shouldn’t have just a minimum level of expectations, they should have specific things from a retirement plan that they DEMAND! 

With life expectancies being greater than ever, retirement could likely be the longest phase of their life.  Therefore, I believe that it is absolutely imperative that you have a plan in place that is well-equipped to not only spend and enjoy your retirement years, but also make sure you don’t make the mistake of “living too long”.

If you have any doubt that retirement planning needs to be an essential part of a financial planner’s practice going forward, take a look at these statistics:

• Nearly 80 Million baby boomers are approaching or entering retirement
• By the year 2020, these baby boomers will control approximately two-thirds of the financial assets in the U.S.
• 75% of investors switch or add investment professionals within 15 years of retirement because they doubt the professional who got them to retirement knows how to get them through retirement*
• 68% of investors surveyed between ages 55 and 70 consolidated their assets as a result of completing a retirement income plan;  an additional 19% said they would like to consolidate**

What do these facts tell us?  Retirement planning is not only a huge opportunity for financial professionals, but it is also a huge challenge!

Retirement planning is an extremely sophisticated process, and I strongly encourage retirees not to attempt this on their own.  In addition to the risk of outliving your assets, you’ve got other money predators to stay away from such as taxes, inflation, stock market and interest rate volatility, health care, social security, and much more.

So the point of this article is to review what I believe to be the “10 Key Ingredients” to a successful retirement plan that every planner should focus on, and every client should DEMAND:

Therefore, if you want your income to keep pace with inflation, then you should demand a well-diversified and well-balanced portfolio to allow you to keep pace with your changing lifestyle over the long term.

1. Therefore, every client should demand a retirement plan that contains clear strategies to properly insulate you against suffering large investment losses and outliving your income.
2. The truth is, we can’t beat the unbeatable opponent (the IRS).  However, our job as financial professionals is to work as master technicians in helping our clients avoid unnecessary taxation.
3. Many studies show that by the year 2030, more than 2/3 of the people alive (in the U.S) will be above the age of 60…WOW!  So the message here is that retirement plans today should demand an outlook consisting of at least a minimum of 30 years.

5.     Income Growth Potential – In order for your income to grow, your assets must grow at a rate that exceeds your withdrawal rate.  This means that, as much as some of you don’t want to hear this, investing a portion of your monies in the stock market plays a vital role in your retirement plan.  Many of you may think that you can accomplish adequate retirement income by simply investing in bonds and CD’s, but that is usually not the answer.  For example, if you consider investing in bond’s or CD’s, and you factor in inflation and taxes, using these income-producing investments may not accomplish the growth you need over the long haul in order for your income to grow (especially considering the fact that interest rates over the past decade have been historically low).  Therefore, this is where the demand for professional money management plays a key role in a financial planner’s retirement strategy.

6.     Maintain Control – Although I mentioned earlier that a successful retirement plan should virtually guarantee that you not only have the income you need, but that you also never run out.  In the old days, this could only be accomplished through an annuity.  The huge downsides to these “old school” annuities were that you would give up the two most important things…control and access to your money.  In other words, an annuity would pay you a fixed income for life, but you would no longer have access or control to these monies.  Not an option!!   In a retirement plan, you should demand that you maintain total control over your assets, both during accumulation as well as distribution, so that you can choose how and where to invest or spend these hard-earned monies.

7.     Maintain Access – Similar to the previous demand for control, you also should demand that you have access to your monies in the event that you need them.  Although every retirement plan should include setting some monies aside for unexpected events or emergencies, sometimes life brings about severe changes that no retirement plan is prepared for.  Because there are so many moving parts in our retirement lives such as our health, interest rates, taxes, inflation, health care costs, long-term care needs, etc., you need to be certain your money is not “locked up” in the event you might need to access it.

8.     Full Transfer to Beneficiaries -- Another common theme I hear from my retired clients is the importance of leaving a legacy.  At a bare minimum, every retirement plan should demand that there is a plan in place to ensure that whatever money you don’t spend will efficiently pass on to your children, family, loved ones, or charities. 

9.     Professional Supervision – Retirement should be one big vacation, where you get to enjoy all of the things you love such as traveling, dining out, buying nice things, gifting or spending money with our families, donating, etc.  The very last thing you should be focusing on in retirement is worrying over your money and your financial plan. In every important aspect of our lives, there are professionals out there who are passionate about taking care of you.  Therefore, you should demand to enjoy your retirement, and leave the worries about your finances to the professionals.

10.   Consolidation – One thing I have learned from my clients is that when you retire, the last thing you want to do is receive multiple statements from many different companies.  I believe a retirement plan should adopt Warren Buffet’s philosophy, which is “Put all you eggs in one basket.  But first, make sure you know everything about that basket.  Then, make sure someone is watching over it very closely”.  Having a consolidated financial life in retirement can not only lead to less stress and worries, but also greater success.

In summary, here is my strong recommendation:  Use these “10 Key Ingredients” as a challenge to put your current financial professional to the test.  It is exactly what my clients DEMAND from my retirement plans, and the truth is, they should not consider working with me if I cannot provide this for them.   I think you’ll agree that these bequests are not only essential, but they really aren’t “asking too much”.

Christopher P. Hill, RFC

Founder and CEO

http://www.localadvisorconnection.com/pdf/RFC-10_Key_Ingredients_to_a_Retirement_Plan-C.pdfhttp://www.localadvisorconnection.com

chris@localadvisorconnection.com

(703) 564-1850