Retirement: Ready or Not?

May 23, 2014

The clock is ticking. Baby Boomers are getting within a 9 iron of their golden years. Most have finally come to grips with the fact that despite the ideal retirement pictured in glossy brochures and commercials—that retirement for most won’t be close to what they envisioned in their earlier years.

For pre and post retirees, all the best laid plans, calculations and formulas have given way to one glaring reality: “This is what I’ve set aside for my retirement. Now, how on earth can I make it last?”

It is time for a reality check and a meaningful conversation about retirement income planning. New research finds the magnitude of the retirement savings shortfall in America is staggering. According to an article in The National Institute on Retirement Security (June 2013) entitled, “The Retirement Savings Crisis: Is it Worse Than We Think?” the U.S. retirement savings deficit could be as high as $14 trillion. As a refresher, a deficit is the amount by which a sum falls short of the required amount.

At the end of the day, the “American Dream” of retiring after a lifetime of work will long be delayed, if not impossible, for many. Acting sooner, rather than later, can greatly improve one’s retirement security. A great way to determine one’s retirement readiness is to answer the 12 Key Questions Every Retiree Must Answer.

It’s one thing to have answers. It’s quite another to have the right answers. Further, a proper Retirement Income Analysis will provide correct answers to these 12 key questions and much more. We will discuss the process and components of a Retirement
Income Analysis in a later writing. But first, get out a piece of paper and number it from one to twelve. Are you ready? Take the time to answer each of the 12 questions with a simple “Yes” or “No.”

If you’re going to be retired for 20 to 30 years or longer, doesn’t it make sense to spend a few minutes NOW to help insure your retirement is everything you envision it to be?

Here are the questions:

  1. If you stop working today, invest your nest egg as safely as possible and try to maintain your current standard of living, do you know how long your money will last?
  2. Do you know which one of the 567 ways to claim your Social Security will maximize the lifetime benefits?
  3. Do you know the proper mix of stocks versus bonds in a retirement income portfolio?
  4. Do you know how big a nest egg you’ll need as you enter retirement if you’ll be retired for 20, 30 or even 40 years?
  5. Do you know the appropriate spending rate from your nest egg to insure your savings will last your lifetime?
  6. Do you know what percentage of pre-retirement income you’ll need to maintain your current standard of living in retirement?
  7. Do you know how the rising cost of health care could affect and even decimate your retirement income plan?
  8. Do you know what your pension annuity is worth and what it costs to buy more lifetime income?
  9. Do you know how longevity affects funding a retirement that may well last 30 years or longer?
  10. If you have a retirement shortfall, do you know how big it is and what can be done about it?
  11. Do you know the proper way (most tax efficient) to leave a financial legacy to your heirs?
  12. Taking everything into account, do you know if your retirement income plans are sustainable?

Having worked with hundreds of pre and post retirees, my perspective is unique. I have the advantage of observing seniors who have prepared well for retirement and unfortunately, those who have not. It’s an interesting outlook as I work diligently with both groups to help their “golden years” become just that, “truly golden.”

Don’t delay your readiness. Unfortunately, I could share with you a host of heart breaking stories of people who procrastinated important financial actions in their lives. Because they did, significant opportunities not only passed them by, but unnecessary hardship befell them. Much of this hardship could have been avoided. Had they taken action, the road ahead could have been so much easier.

While a missionary in the Philippines some 30 years ago, I memorized a quote by an unknown author that has remained with me. It reads, “On the plains of hesitation lie the bleaching bones of countless millions who on the dawn of victory sat down to rest and while resting, died.” There is no time like the present. Our beloved Will Rogers said, “Even if you’re on the right track-you’ll get run over if you just sit there.”

Let’s not be like the two lions who, while sitting on the side of a mountain, saw Noah and his company sailing in the distance. One said to the other, “Oh, was that today?”