Hitting the Mark in Retirement
One thing that’s always stayed consistent in my industry is the idea of achieving a certain “number” in your financial portfolio. Hit that number, and then you’re all set and ready to roll for retirement. Sounds easy, right?
Unfortunately, it’s often not as simple anymore as just waiting until your accounts roll into that desired digit. You’ll often find that the chase to the finish line seems to keep lengthening on you over the years—and you wouldn’t be crazy for thinking so either.
The “number” is a target that moves constantly depending on a variety of factors at play in our economy. In 1998, the mark to hit was $289,000; in 2008, it was $414,000; today it’s more than $500,000 to achieve that comfortable middle-class retirement dream. Planning on living in a more costly state like California or New York? You might need to tally up even more in your accounts if so.
A more personalized version is “ten times” rule, where you need to have saved ten times your current average annual income to retire without facing a severe income shortage down the line. The theory goes that if you’re used to living on an annual average of around $50,000 a year, you’d need $500,000 to retire. It’s thought that this rule helps to gauge how much is needed to keep up your current lifestyle, but only operates under the assumption that no major changes in your life or financial portfolio will be occurring.
The bigger problem here is that while both guidelines are helpful for those wanting to make sure they’re generally moving in the right direction, they’re not guaranteed to help you cross the finish line of having a tried-and-true plan in place. Even if you save 10 times your annual income, what if that doesn’t account for a splurge in vacationing or new toys during your first ten years of being work-free? What if another 2008 hits and your accounts can’t escape from a market downturn? Heck, what if inflation just upticks in an unprecedented percentage and your retirement piggy bank goes from being able to last you 20 years down to 5?
Guides that teach pre-retirees to aim for a certain monetary goal don’t take any of the above scenarios into account, or any of the other thousand that might happen during your retirement years. A crucial step of our planning process is first learning what your goals are in retirement, and how those line up with the current status of your financial picture. More importantly, we also focus on planning for what happens if things change (and trust me, they will!)
Personal goals, your health, family situations, account balances, market patterns—they all change over time. No one retires in a bubble, and you can’t just hit pause on the world (or yourself) for the entirety of your retirement years. If you feel like your plan might be too focused on hitting a certain number, rather than being focused on hitting your needs, please feel free to give our office a call to set up a consultation with one of our advisors.