Financial Advice for Retirees
The best planning is rooted in sound cash flow management. Each investor, retired or otherwise, needs to have a cash flow budget. A good cash flow statement tells us a lot about the reasonableness of retirement goals. How much we spend and save is the linchpin to any successful retirement plan.
Financial planners and advisors often over simplify two areas of retirement planning: longevity risk and lifestyle expenses. Because longevity risk (the risk of running out of money before running out of breath) weighs so heavy on the advisor psyche, we plan for longer than average life expectancies. Planning until age 95, or in some cases 100, helps clients and advisors dispel much of the longevity risk issue. It may cut client spending along the way by planning for a horizon that is not statistically likely.
The other retirement planning assumption we often see oversimplified is what our client’s lifestyle expenses are. In our experience, the expected retirement expenses ebb and flow over the lives of our retirees. Often, newer retirees find themselves spending more in retirement because they have the time necessary for travel, hobbies, and newfound opportunities to spend. In the middle to late retirement, spending may slow. Houses sometimes get downsized, travel may lessen, cars might be driven less, and the trappings of consumerism lose some of their appeal as some retirees spend less time accumulating possessions and may instead feel a calling towards simplification.
How We Pursue Retirement Planning with Our Clients:
We employ modern financial planning software that can help clients plan dynamically. We can assist with looking at variables within each client’s unique situation. Uneven spending can be factored into the retirement plan projection. Considerations with life expectancy can also be toggled to help determine optimal spending and portfolio allocations. Retirement planning is one of the most interesting things we get to do as advisors. We learn our client’s varying sentiments about the variables we utilize for spending and expectancy.
We should all remember why it is that we are investing and stay focused on these life goals and aspirations. We realize that the lives we lead now and in the future need to be sustained by well-reasoned asset allocations and appropriate spending for a long and healthy life. For our oldest clients whose time frame is not as long, we can begin the discussion of how their money will outlive them and what is the best way for that legacy to help the people and causes that are most dear to them.
Whether you are already an experienced retiree or planning an upcoming retirement, having a solid retirement plan is a core part of feeling financially secure.
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Get in touch with a Parsec Financial representative at an office near you.