Planning Pays Off

It’s a big step shifting from a career or careers spanning 40 years or longer into a new lifestyle where instead of spending your days accumulating wealth, now you’re drawing down from your life’s financial achievements. Moreover, with people living longer and healthier lives, it’s more important than ever before to put loads of thought into what you’ll be doing and when throughout your retirement – before you retire.

We polled a handful of advisors for their thoughts on how to think about and prepare for these shifts in spending and living. Where they feel more planning pays off gelled into three key retirement focuses: general spending, spending on contingencies, and spending your time.

Planning Your Spending

According to the Brookings Institution, “converting retirement savings balances into a stream of retirement income is one of the most difficult transitions that households need to make.” Indeed, the shifts are emotional as well as financial.

“One thing we see a lot of clients struggle with as they get to retirement is switching from a saver’s mindset to a spender’s one,” says Ryan Mizer, RIA and managing director at Wolfgang Capital in Temecula, CA. “They spend years saving money so they can retire, but when that happens, there is a big mental switch to learn that now you must use all those assets you have saved to create yourself a paycheck.”

What often happens, Mizer continues, “is that we find many people tend to underspend during the first few years of retirement. Those should actually be higher spending years, because typically, here you are the healthiest and most active you will be during retirement.”

“People often struggle with this, but it really underscores the importance of having an income plan during retirement,” says Mizer. “A good plan can give retirees peace of mind knowing what they can comfortably spend on a yearly basis and still have the retirement they planned for – for as long as they live.”

Planning for Contingencies

Kathe Wright is the senior portfolio administrator at The Roosevelt Investment Group in Manhattan, New York. She believes that “the most important determinant of the quality of a retiree’s lifestyle is the degree of planning that goes into establishing a cashflow that can enable goals.”

As Wright explains, “more so than any other question, most pre-retirement clients struggle to come to grips with the reality of having to live on their savings and social programs, rather than on a consistent paycheck, for the rest of their lives. This transition is made even more daunting by the array of new challenges and expenses retirees face.”

Wright says that retirement planning needs to address a wide swath of realities and contingencies. “Planning can be complex, ranging from simple budgeting and cash flow for everyday life to handling an unexpected illness for you or your spouse, a late-age divorce, or the support of adult children or grandchildren.” Soon-to-be retirees also have to be careful “to avoid financial conservatism, reckless investments and another important risk – elder fraud.
Complications can come from all directions – and you have to be mindful!”

In the end, “it’s very helpful to have a trusted advisor to help with the process. They can provide you with an objective perspective during unsettling, unfamiliar, emotional times and lend you the confidence that you won’t outlive your money.”

Travis Maus, AIFA®, CEPA, and managing partner of S.E.E.D. Planning Group, LLC in Binghamton/Syracuse/Whitney Point, NY could not agree more: soon-to-be retirees need experienced, specialized, professional guidance.

“There’s too much reliance on conventional wisdom,” say Maus. “Every client has special circumstances and deserves advice specific to their personal situation, yet so many rely on advice from friends, entertainers, non-specialized financial professionals, or internet posts and articles.” Since all clients are different, so must be the considerations for financial and retirement planning. “The advice they receive needs to match their unique priorities, goals, and financial resources. This is very different from the information they are finding online or via their friends or favorite financial show. They need help to peel back the onion of their own personal situation.”

Planning for Living

Another important piece of advice for soon-to-be retirees: it’s not entirely about the money. You should also be planning on what it is you want to do within retirement.

“Getting to the point of retirement financially is just a small factor in the equation of retirement,” says Carl Hanson, CFP®, an investment advisor representative at IIS Financial Services in Portland, ME. “A major life change in retirement is the transition from being occupied at work all day to an open calendar.”

So a big piece of retirement planning, often overlooked, is thinking about what activities will be filling the days. Volunteering, playing sports like tennis, pickle ball or sailing, travel – addressing the ways you and your spouse or partner can stay active mentally and physically should play an important role in the retirement plan.

“Shifting from a purposeful career to the next adventure should be discussed as much as if not more than the question of do I have enough to retire?” says Hanson.

These are four advisory executives sharing their thoughts on planning for the shifts in lifestyle from employed to retired. What additional ideas can you contribute?

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