Retirement Planning


Retirement planning involves setting goals, analyzing current resources, making intelligent projections, as well as implementing and monitoring your plan.  Once you know when you can realistically retire and what it will take to get there, it’s much easier to stick to your plan through the good times and bad.

At Turning Point Financial, we walk each of our clients through a retirement planning process that helps them clearly see when and how they will be able to retire comfortably.  This involves looking at current resources, expenses, projected savings, projected expenses in retirement, and future income from things like pensions, annuities, real estate and social security.  Combining this information with projected life expectancy and historical financial market information, we use Monte Carlo analysis to estimate how and when you’ll be able to retire.  While no one can predict the future of what the equity or bond markets will do, what inflation rates will be, or how long you’ll live, this thorough process gives clients the peace of mind to know where they are headed and how long it will take to get there.

Having a retirement plan is like having a GPS in your car for a trip.  When you use a GPS you know where you are headed and approximately how long it will take to get there.  But sometimes during your trip there will be traffic delays, construction or detours that require you to take a different path which may change your time until arrival.  Even if you end up taking a different route, you still know where you are going about when you will arrive at your destination.  The retirement planning process is no different.  Sometimes there are changes to how much you can save, which may increase or decrease.  The markets are unpredictable so you can never be sure exactly what kinds of returns your investments make.  You have an idea of how long you plan to work and save but that may change due to health concerns or other circumstances.  And finally, we can estimate how long you will live based on life expectancy tables, but we all know that is impossible to predict.

For all these reasons, retirement planning will give you a very close estimate of what your retirement will look like, but it’s not an exact science that can be predicted with perfection.  This is why we try to take our clients through this process on a regular basis to update their plan, keep them on track, and moving forward in the right direction.

Here is the information you will need to collect for us to begin the retirement planning process with you:

  • List of all current investments and savings accounts (401K’s, IRA’s, brokerage accounts, savings accounts, cash value life insurance, etc.)
  • Annual additions to these accounts, including company matching, profit sharing, etc.
  • Other assets that will contribute to your retirement (real estate, sale of a business, collectibles, etc.)
  • Current monthly income
  • List of all income sources you’ll have during retirement (social security, pension, rental properties, part-time employment, etc.)
  • Estimated monthly expenses during retirement

Your monthly expenses during retirement have to be an estimate.  Retirement may be 10 or 20 years away, so it’s hard to know how much you’ll be spending that far into the future.  Our experience has shown that most people need approximately 80-90% of their pre-retirement income to retire comfortably.  This is because most new retirees tend to spend more time traveling and doing the fun things they’ve always wanted to do but couldn’t because they were working full time.  As people progress into retirement and get older, they tend to spend less time and money traveling and playing, but more money on health care.  For the most part, you can base your monthly retirement expenses off of your current monthly expenses.  A few major factors that will drastically change the numbers are are house payments and the costs of raising your family.  Just remember, expenses for kids don’t always go away after they’ve moved out.  In doing these projections, we have to make assumptions about the future and then adjust accordingly down the road.  Once you figure out how much you’re spending each month now, we can help you estimate what that will be down the road during retirement, adjusting for inflation.

Inflation, Longevity, Health Care

Investors face a host of risks during retirement, but most are surprised to hear that the biggest ones of all are inflation, longevity, and health care.  Inflation may not seem like a big deal at an average rate of around 3% annually.  However, some things that retirees spend money on (ie: healthcare) inflate at much higher rates than what the CPI might suggest.  And in the later years of retirement, health care costs can potentially become a huge expense.  Being retired usually means that you’re no longer adding to your nest egg, but rather spending it down, and potentially for a very long time.  It is becoming more and more common for people to live well into their 90’s and even 100+ years.  When you think about how much it will cost to stay retired for 35 years or more, you can see why retirement planning is so important, and why inflation is such a big factor in the projections.