Category Archives: Retirement Income

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It’s Time to Leave “Someday Isle” and Start Planning Your Retirement Journey

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The Employee Benefit Research Institute conducted a telephone survey recently and asked people age 25 and older how they felt about their retirement finances. The responses were interesting and confusing. As the Wall Street Journal reported, it conveyed a sense of false hopes for many Americans. Consider:

  • Two-thirds of those surveyed said they felt confident about their retirement income preparations but…
    • 64% said they or their spouse had saved for retirement
    • 57% said they or their spouse are currently saving for retirement
    • 44% said they or their spouse had tried to calculate how much money they will need in retirement
    • 32% are confident Social Security will provide sufficient benefits
    • 22% said they had saved $100,000 or more for retirement
    • 19% stated they had received advice from a financial advisor

So the survey results above don’t match up with the expressed optimism and confidence. What gives? Are we fooling ourselves into a retirement death spiral or are we afraid to face the reality that the boomer generation just hasn’t done a good job of preparing for retirement?

In either case, it’s time to get over the “woulda, coulda, shoulda” thinking and start looking at what we can do right now, today. I am sharing my “Ready List” to quote my old college football coach, Bill Walsh. Just as a football team develops their Ready List to prepare for an opponent you too need a “Ready List” – the retirement income planning “plays” you can “run” right now depending on what opponents you are facing right now which could be one or more of these:

  1. I haven’t saved enough
  2. I’m not contributing to my company 401k or other retirement plan
  3. I don’t understand how Social Security works
  4. I spend too much money on “stuff” instead of saving for retirement

And there may be more. But let’s start where we are and go from there. Get off the “Someday Isle” and let’s look at these possible solutions – my “Ready List”

  1. Start with the end in mind – Sit down with a CFP (Certified Financial Planner) and figure out how much you have saved right now. Together you can uncover the retirement income “gap” and discuss solutions to help bridge the gap with one or more of the Red Line Solutions discussed below.
  2. Look at your expenses – We need to look at what you spend now and what lifestyle you want when you retire. Most people want the same or as close to the same lifestyle that they have pre-retirement. So we typically use 70-80% of your pre-retirement expenses in retirement as a starting point.
  3. Don’t forget Social Security – This can make a huge difference in your retirement income projections. It’s a guaranteed annuity with inflation protection. We need to figure out when the best time to start taking benefits will be. Don’t assume it’s at age 65. More on Social Security here.
  4. Find the gap – I use a terrific program called Retirement Analyzer. Once we account for your assets, expenses, Social Security and other potential sources of income we can determine when you will or won’t run out of money. We call this the Red Line analysis. The Red Line is when you will run out of money. We want to push it beyond age 100 just to be safe – make it disappear!
  5. Bridge the Gap – Depending on where/if your Red Line shows up, for example, at say age 75, then we need to come up with Plan B. We call these the Red Line Solutions. What are those? Here are some examples:
  • Modify when you start taking Social Security
  • Work longer
  • Work part-time in retirement
  • Reduce expenses in retirement
  • Increase contributions to retirement accounts
  • Sell an asset

I explain these Red Line Solutions in more detail here. Beating yourself up over what you haven’t done won’t get you any closer to an enjoyable retirement. Taking action now will. You don’t have to do it alone. Work with a professional advisor and get started on your retirement income plan. That’s the only one that matters.

Time Out! What is the number one roadblock to your retirement income goal? You can leave a comment here.

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The Stockdale Paradox and Your Financial Decisions

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Viet Nam prisoner of war, James Stockdale, experienced some of the greatest inhumanity towards man that anyone can suffer. He lived to tell about it, and he left lessons that can help us maintain perspective during this pandemic and can provide guidance on managing our financial decisions.

On September 9, 1965, Wing Commander James B. Stockdale was shot down over the jungle canopy in Hanoi, Vietnam. As he was parachuting out of the wreckage, he had the presence of mind to prepare himself for what awaited him when he landed. He said to himself, “Five years down there, at least. I’m leaving the world of technology and entering the world of Epictetus.”

Epictetus was a Greek philosopher who espoused, “There is no such thing as being a “victim” of another. You can only be a victim of yourself. Stockdale returned home a hero after 2,713 days in captivity. He later told Jim Collins, author of Good to Great, “You must never confuse faith that you will prevail in the end (which you can never afford to lose) with the discipline to confront the most brutal facts of your current reality, whatever that might be.”

Jim Collins coined the phrase “the Stockdale Paradox,” as a way to describe the battle we face between optimism and pessimism. We face such a struggle amidst this pandemic. We keep hearing that it will be another 30 days, and then things will be back to “normal,” and then 30 days come and go, and another time frame is thrown out for us to consider. What if it is another three to six months?

According to Stockdale, the optimists did not survive the brutality of the POW camp. They hoped for a rescue by Christmas. Christmas came without relief, and then they said the rescue would come by Easter. Eventually, they died of a broken heart. Optimism is not a good foundation on which to base financial decisions.

Here are some ways to make financial decisions in the framework of the Stockdale Paradox:

  1. Realize the stock market is volatile yet time in the market is a proven strategy in the most unpredictable times versus running to the sidelines.
  2. Revisit your risk tolerance – has anything changed?
  3. Work with a financial advisor or financial coach to reallocate your investments if necessary.
  4. Anchor your investment decisions with your financial plan – if you don’t have a plan, get one completed!
  5. Balance your optimism or pessimism with the reality of the current economic state – learn what you can from trusted sources.
  6. Don’t be a “victim.” We can only control ourselves and how we respond. Respond with knowledge and a plan.

Stockdale’s approach was to find a way of thriving in whatever circumstances he found himself in so he could make it day to day for as long as necessary. While we all hope for a speedy resolution to this pandemic, let’s do our best to be the masters of our fate and control our financial destiny with a solid plan and faith in our economic system.

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5 Ways That You Can Retire on Your Terms Even If You Are Getting Started Late

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Being a CERTIFIED FINANCIAL PLANNER®, I am naturally more in tune with the truthfulness or, should I say, the intentions of retirement advertising. It’s all about hitting the pain points. Not much fun, right? At least buying a new car or a house is fun. Yet sometimes the important things in life are not “fun”. Retirement planning is one of those things.

When you need a new car, you check out the rates at the credit union. If you need a mortgage you also check rates. In other words, you shop for the best rate before you shop for your car or your new home. When was the last time you said, “Hey Honey, we haven’t saved enough for retirement. Let’s go down to the credit union and meet with a financial advisor.”? Probably never. I wish people were as in tune with their retirement planning as they are with getting a new car or a new house.

To compound matters, the big financial companies, that can afford to advertise on TV like to make you succumb to what I call the Lump Sum Scare. You know, they tell you that you need a lump sum of several million dollars or you won’t be able to retire – ever! I know better. If you haven’t saved “enough” and that is a relative term. It’s as personal as your fingerprints, you can still retire, be they different terms than maybe you are thinking about right now.

Let’s look at 5 ways you can retire on your terms, even if you are starting late.

  1. Work longer, retire later. Don’t forget, each year that you continue to work increases not only your Social Security benefit, if you have a pension it could increase that benefit as well. It will also allow your retirement investments to continue to grow (401(k), IRA accounts, and taxable investments)
  2. Work a second job or part-time after retirement. The first step is to figure out what your income shortfall will be and then you can start considering the type of part-time work you will need to supplement your other sources of income in retirement
  3. Reduce monthly expenses. Yes, this can be a painful process but in many cases, it will be necessary. This is why the budgeting step is so crucial. You don’t know what needs to be reduced if you don’t know what you are spending. Check out my “Budgeting That Makes $ense” course for a great way to develop your own successful budget. You can also get a free copy of my  Budget Tracker tool to get started. Most retirees don’t need to live on their pre-retirement standard of living. It will probably be somewhere between 70-80% of what you are spending now. Once you have your budget you can figure out what can be reduced or eliminated.
  4. Increase the contributions to retirement accounts. Use the power of compounding and time to work in you favor. Even a small increase of $50 to $100 a month can have a dramatic effect on your retirement savings depending on how long you have until retirement.
  5. Sell an asset. Again, probably a tough decision. Maybe not, if that vacation home is going unused now that the kids have grown and are not as interested in using it as they were once upon a time. Or maybe you want to downsize and get a smaller, less expensive home or move to a part of the country that is less expensive than where you live now.

Don’t be brow-beaten by TV and social media. Meet with a financial advisor or check out my coaching offer and decide what your retirement terms look like, even if you don’t have a big lump sum saved. You can still retire on your terms. Even if you are starting late. Get my free guide to retirement when you are starting late here.

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Hall of Fame Retirement Advice From a Celtic Legend

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Several years ago I wrote a little book titled, Think Like an Athlete, Manage Like a Pro, where I extolled the many positive personal qualities that successful athletes utilize and that business leaders can employ to build their companies. One thing you won’t hear me recommend is that you invest like an athlete. The halls of retired professional athletes are littered with tales of bankruptcy and financial excess leading to financial ruin. One statistic I read recently stated that 78% of pro football players and 60% of NBA players are bankrupt within 5 years after retiring!

With this knowledge I was all the more intrigued to learn of the financial success of one of my all-time favorite athletes, John “Hondo” Havlicek. A recent Forbes magazine article explained how Hondo achieved his success with discipline and sound advice. Consider that he earned $15,000 in 1962 as a professional basketball player with the Boston Celtics. If we factor in inflation at 4% per year then $15,000 per year in 1962 would equate to $116,524 a year in 2014. There are probably ball boys in the NBA making that much today. So how did he do it and what can we learn from his success?

  1. Start early. Yes, Hondo told his advisors to invest his money in “Blue Chip” stocks. He was looking to invest his money for the long haul. Like Hondo if you don’t understand investing go with companies that you are familiar with which typically are Blue Chips, those that make up the DOW for example – like AT&T, Lockheed, Eli Lilly, H&R Block and UPS. The best way to invest in Blue Chips is through a mutual fund such as an exchange traded fund (ETF). If you didn’t start early, OK start now. It is never too late.
  2. Stay invested. Hondo didn’t try to time the market. He learned early that markets go up and down but over time he would benefit from the historical growth of the market instead of potentially missing some of the best days by pulling out when things look bleak. Consider that 95% of the market gains between 1963 and 1993 resulted from the best 1.2% of the trading days during that time! If you missed 90 of the best performing days your return would have dropped from 11% to 3%. Stay invested!
  3. Don’t overspend – Even though $15,000 a year in 1962 was considered a good income Hondo knew his career was not infinite so he had to prepare for the long –term. If you put a budget together now and start living within your means and find some extra dollars to invest it can have a huge impact on your retirement income.
  4. Find a financial manager you can trust. This was critical to Hondo’s success as he relied on expert advice early on especially when he invested in several Wendy’s hamburger franchises. Many pro athletes go broke because they pick an advisor who enables their bad spending habits instead of providing the “tough love” advice that is necessary especially at a young age. You should find an advisor who you trust and who provides good overall financial advice not just investment advice; financial planning advice. A good place to start is with a CFP – a Certified Financial Planner.

Unfortunately we tend to hear and read about the financial misfortunes of athletes. So it’s refreshing to hear of a success story like that of John Havlicek. What makes it even more meaningful is the fact that each of us can and should relate to his financial story and heed his advice. It’s much more difficult to relate to the mega millions being paid today to athletes and to comprehend how they can lose it all within a short period of time. Take these four tips to heart and you too can retire on your terms. Plan well. Live better.


Time Out! Which of the four steps John Havlicek embraced for his sound financial plan is most important to you? You can leave a comment here.