I like a good adventure but I have my limits. One adventure I have no intention of taking is climbing Mount Everest. Just because I will never summit Mount Everest doesn't mean I can't learn lessons from those who have.
Did you know that 73% of the deaths on Mount Everest occur on the way down? Climbers drain their energy on the way up and they lack strength for the descent.
Without making light of these terrible climbing accidents, however unfortunate, they can help us consider planning for retirement.
When planning for retirement, the summit is not the only goal
Retirement is the transition from people at work to money at work. Income is no longer generated from working and earning a paycheck, but from the assets someone has saved over those decades.
Some financial planners might only focus on a target number to reach, which will trigger the ability to potentially retire. "Grow your assets to $3 million and then you can retire comfortably."
When planning for retirement, the goal is to be able to retire (i.e., reach the summit) and to live comfortably throughout retirement. Thus, a financial planner should also account for potential challenges such as inflation and health care costs.
There are more concerns even still. In addition to the factors listed above, a comprehensive retirement plan should also plan for the unknown and the known such as: living past life expectancy, dying prematurely, potential tax law changes and the impact on RMDs, the tax impact of one spouse passing and one living on, and the possibility of supporting a family member while in retirement, among other factors.
How to avoid the pitfalls for a smooth descent
"The only certainty is that nothing is certain." According to the Internet, this quote comes from Roman philosopher Pliny the Elder. We know this to be true and we prepare for uncertainty in our working years with tools such as insurances and an emergency fund. Uncertainty persists into retirement, and these tools may continue to provide value in that phase of life.
Financial pressures never cease to exist, they just change at different ages. Because uncertainty will always exist, it's important to always maintain a safety net. In addition, while on a fixed retirement income, major unexpected expenses could be problematic.
To the extent it's possible, retirees should avoid large purchases such as home construction or repairs, dental work, and expensive bucket list items. For those planning to downsize, work with a trusted realtor to understand home value and the improvements that may need to occur before listing a home for sale. Moreover, plan for RMDs well in advance so there are no surprise tax bills. Finally, never stop saving money and managing cash flows.
Retiring can feel like being on top of the world; a climber summiting Mount Everest is, literally, on top of the world. But there are no hot showers or comfortable beds at the top of the mountain, so climbers must be ready for the descent. Just the same, retiring is a worthwhile goal but the true achievement is living comfortably all the way through.
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Attorney Kyle Zwiren works with Financial Architects Inc., an independently-owned company located in Farmington Hills. Zwiren and his team serve attorneys and other professionals to help them design financial plans in line with their goals and based on optimal efficiency. He practiced law prior to becoming a Financial Architect and left the practice to follow his passion. To talk to Zwiren about other topics featured in The Economic Blueprint, email him at kzwiren@financialarch.com or call him at 248-482-3622.
Published: Fri, Nov 08, 2019
