How to Do a Written Financial Retirement Plan

Hello, I am Albert Stout. This is one of a series of videos to help you with your retirement. Each video provides you with information about a different aspect of retirement.

These men and women look like they are having fun and enjoying life. They are retired and look carefree. Isn’t that what we all want for our retirement years? We want to have a carefree retirement and to know we do not have to worry about having enough money on a monthly basis to live comfortably and do the things we want to do. And if something does interrupt the carefree years, we want to know we can handle it financially.

This video is about putting together a written financial retirement plan to help you have that care-free retirement.
There is a saying, “failing to plan is planning to fail.” When it comes to retirement, a lot of people fail to properly plan. When they retire, they have their social security and maybe a pension, and the big bag of money they have worked hard to save. This big bag of money may be in an IRA, 401K, some other type of qualified plan, or regular savings. Most of it is probably invested in stocks and mutual funds that were picked years ago. For more conservative people it may all be in cd’s.

The plan is to each month live off of their income. If their income is not enough to cover all their expenses, they will take the rest out of their big bag of money. But once they are retired their attitude changes. They don’t want to dip into their bag of money. They fall into a “just in case retirement.” Just in case they live longer than they expect, just in case they need long-term care, or just in case if inflation gets out of control. They worry that they may outlive their money. Or something else might happen that increases expenses. So they cut back on their spending and give up some of the things they dreamed of doing once retired.

Putting your retirement plans in writing helps you pick a path you can follow so that you can accomplish your goals and enjoy your retirement. Part of the plan is to put in writing now, how you will handle certain problems if they occur in the future. If you have a written plan and something happens to knock you off that path, then you know in advance what to do.

So how do you go about putting together a written financial retirement plan?

First, if you are married, you need to do this together. So sit down and see where you agree and where you disagree, and see what kind of compromises you can come to and what kind of goals you can list.

Next, you must determine where you are today. When are you going to retire, or are you already retired?
Make a list of your income sources and your assets. What will be your monthly income from social security? Will you have income from other pensions? Do you have a 401K, an IRA, or some other qualified account? Do you have savings? A brokerage account? What is the total size of that big bag of money?
Everyone is concerned about having access to good quality health care. We equate this to having good health insurance. What are your options for health insurance, and what will it cost you? I have other videos dealing with health insurance and Medicare.

What are your goals for your retirement? What do you want to do to enjoy your retirement? Do you want to play golf? Do you want to travel? Have a vacation home? How much do you need on a monthly basis to live the retirement you want to live?

After you have done your goals, you need to identify your tolerance for risk. How much could you stand to lose and still be able to say, “I don’t like that, but it’s not affecting my life, and it’s not affecting me psychologically; I’m ok with that loss.” This determines how you should put your bag of money to work.

Now it’s time to start playing the what-if game. What happens if he dies first? Is there a “gap” in her income? Does she have enough income to continue her lifestyle and accomplish her goals? What happens if she dies first? Does he have the income he needs? What happens if one or both of you need long-term care? What happens if there is a market crash? What if inflations gets out of hand?

Once you have all of this down in writing, the next step is to establish a written retirement income plan that provides guaranteed income for as long as you live.

You want income coming in every month so that no matter what happens, you can accomplish all your goals and enjoy your retirement. So if the market crashes, you still have all the money you need to accomplish your goals and enjoy your life. You never have to worry about running out of money. You have the money coming in every month to accomplish your goals. Having the income every month will give you peace of mind.

Once you have developed a written retirement income plan, the next step is to establish a written retirement investment plan. Throughout one’s working life, investing is about being aggressive and trying to grow. But investments act differently once you are retired. Losses hurt you more than gains help you. It is more important to hang onto what you have accumulated over the years than it is to try to aggressively increase it and risk losing part of it. So in retirement, your investment plan needs to be one that takes the least amount of risk to get the returns you want so that you can accomplish all of your retirement goals and enjoy the rest of your life.

Next, you need to complete your written retirement income plan and cover things like tax planning. I suggest every year in November you should do a mock tax return to see if there is anything you can do to reduce your taxes.
At the same time review your estate plan to make sure everything is in order. Have there been any life or health changes that require you to change beneficiaries? Are you sure the beneficiaries are correct on all of your legal documents?

This may take a lot of time to do the first year. The good news is after that it will not take long at all to maintain.

That is a quick overview of the process I follow to help my clients set up a written retirement financial plan. Doing your retirement plan this way will help you to have a carefree retirement. It lets you plan in advance for the things that can go wrong. So 5 years, 10 years, or 20 years into retirement, you do not have to start worrying about outliving your money. It allows you to sleep well at night, enjoy your retirement, and have peace of mind.