A couple of years ago, ING started a great marketing campaign to encourage people to start saving for retirement. The “What’s your retirement number?” slogan was undoubtedly derived from a common question that financial advisors hear from clients every day. The question is, “How much money do I need to save before I can retire?”
Determining how much money you need in retirement can be a daunting task. A quick search online will find a myriad of retirement calculators and investment strategies, but none of them seem to offer any clear understanding of how your finances should be handled throughout retirement.
As a financial advisor, I often use the “retirement number “as a starting point for a much larger financial planning conversation. More often than not, retirees have multiple goals for retirement which can make it more difficult to come up with a single retirement number.
At FSAM, we prioritize our client’s retirement goals as either a Need, a Want, or a Wish. Common goals like basic living expenses, health care, and education are generally classified as a Need. Other goals like travel or celebration expenses are generally classified as Wants or Wishes. Whatever your goals may be, it’s important to prioritize each of them to help create a more meaningful retirement plan that is both achievable and realistic.
Once retirement goals have been clearly defined and prioritized, we can then begin to create the foundation of the plan to achieve goals that are classified as a need. For a comfortable retirement, you certainly must be able to pay your basic living expenses without running out of money. But, a truly satisfying retirement lifestyle would also include sufficient money to pay for other purchases and activities that go beyond your basic living expenses. Things like charitable giving, travel, and education for grandchildren are just a few of the more common goals that can make retirement satisfactory and enjoyable.
Retirement planning is a complex exercise that really can’t be dumbed down into a single number. As you begin to approach your retirement years, it’s important to begin thinking about what your priorities will be in retirement. A good retirement plan can help you fully fund the goals that are most important to you, and then prioritizes the remaining retirement goals based on order of importance and achievability. If you think it might be time to start an in-depth retirement plan please feel free to give us a call.