We get to talk to a lot of people around the United States and even expats who live around the globe. And when we’re designing ideal retirement income plans, one topic that comes up over and over is the risks that we currently face. Some of common worries that we hear from people are:
- how a certain political environment could impact the market or impact their finances
- decisions being made and how are they going to change things
- is the dollar going up or down
- what happens if relations with a certain country escalate
- is there going to be inflation or deflation
- what if a major market crash ruins my retirement
Many people come to us thinking that there are all these different problems that we have to solve for and they have to prepare for. But I have good news for you because none of these issues are the real problem.
The Real Problem
The real problem is that you don’t have a clear and concrete plan of action for how to navigate these scenarios if they do happen. I’m going to explain how to do that, but first, I want to share an example. You’ll see that once you have the right plan in place, things get a lot easier for you.
Last summer I drove to Nashville, Tennessee. At the beginning of the trip, I plugged my destination into the GPS and it mapped out my entire path. I didn’t have to worry about future roadblocks or detours or any things that might be ahead that I have no control over. All I did was drive and enjoy my audiobook. When unexpected detours did come up, the GPS accounted for the change and updated the path, alerting me when necessary.
If I didn’t have the GPS, it would have been a much different experience. I’d be looking at every highway marker to make sure I didn’t miss my turn. And if there were detours, I’d have to get out the map and figure out the next best route to use. But since I did have the GPS, it turned out to be a pretty smooth ride.
This is how your retirement plan should work too.
Once you have a plan, you should have more confidence with your finances in retirement. You shouldn’t have to worry about unexpected events and things that could affect the economy or the markets because you’ve planned ahead for it. You should have a plan that you understand. And, have the right systems in place so that you can follow it easily. All of this is so you can live an exciting, fulfilling, joy-filled retirement.
The goal of retirement isn’t to have this plan that you follow. But to have a plan so that you can do all the other things you want to do with your life.
How do we do it?
At Streamline, we model potential risks ahead of time. This way we can be prepared and know what to do if one of these scenarios happens.
If you’re currently working with an advisor, or interviewing potential advisors, ask them what financial planning software they use and if they can model out potential scenarios. Some specific questions you can ask are:
- Is there a way to model if inflation rose higher than expected?
- What if we base our returns on investments on lower-than-expected returns, instead of on past returns?
- How to optimize Social Security?
- When should we start collecting Social Security?
If they say they can’t do any of these things, they might just be investment managers. They aren’t helping people with income planning and tax planning, which is really important. Also, if they model out retirement by using a spreadsheet, ask to look at an example to see if you can understand it. You should be able to understand the plan that you have.
If you don’t want to work with an advisor, I have a DIY Retirement Plan in which I share some of the best consumer-facing calculators. Utilizing one of those calculators could be a way to model out some of the various scenarios as well.
Remember not to worry about the potential problems you might see on the news this week. Focus on having a proper plan and understanding the proper process of planning. A plan can be useless the day you create it because life changes so fast. But if you practice the process of planning, it will be invaluable.