When I give webinars or speak at state conferences, one of the primary points I attempt to make is how important it is to be thinking about your retirement; and the earlier (i.e. younger) the better. However, making that point to Millennials or even (and more importantly) Gen Xers can sometimes result in blank stares, as in “I’ve just started my career, I’ve got 30 years before I retire, what are you talking about???”
“I have a 401k!”
“I’m going to get Social Security!”
“I have a retirement pension plan at work!” (Lucky you, as those are becoming less and less common)
And on it goes. Yes, all of those are valid responses. Most likely, they are based on your current life situation, since, what else could they be based on?
Yet, every day you and I know of someone who just lost a loved one, got divorced or married, had a child arrive, or a parent who needs financial help. Life situations change for all of us, often at a moment’s notice with no warning.
Add to that those of you who have said, “I/my mom/my sister/my next door neighbor/my best friend at work doesn’t have anyone he/she can trust to discuss his/her financial situation with.”
That, whether you realize it or not, is a big component of retirement planning. The simply stated but highly complex question of “What do I do with my money, and more to the point, how can I (my mom/my sister/my next door neighbor etc.) be comfortable knowing there will be enough money there at retirement?”
The Personal Connection
It’s important to denote the difference between the firm that manages your 401k or retirement plan at work, and a personalized Retirement Plan. Hundreds of firms manage trillions of dollars in pension plans, IRA’s and the like and as far as I know, they all do a respectable job of it. I personally have my investment account with Charles Schwab.
But that account, and your 401k, and your government pension, does not constitute a retirement plan. They most definitely are funds you hope to utilize in your retirement, but a plan they are not.
An Individual Retirement Plan is, or in my opinion should be, just that: individualized. A large investment firm can manage money and place your funds in a variety of stocks, bonds, fixed income instruments, etc., based on your general guidance…
…But…
…What I think everyone in the Millennial and X Generation should have is a detailed, personal Retirement Plan. It’s not difficult to find Financial Advisors who are happy to work with you if you have a $1 million portfolio, the minimum typically required for a money manager to take you on as a client. But what if you are a 32-year old single female working her way up the corporate ladder? A 35-year old firefighter who along with his wife just had their second child? They are as likely to have a trillion dollars as a million dollars. That $42,000 they have put away is all the money in the world to them, and that should be the measuring stick.
If it’s all you have, it’s all you have, however much that is and whether or not it meets the threshold of a particular investment firm. That $42,000 is your million dollars and it needs to be treated as such, with a strategy to grow it and couple it with multiple income streams in a Retirement Plan that fits your specific set of life circumstances.
“Sorry, You Don’t Meet Our Minimum”
I don’t know how many people with small accounts hear that from firms, but I know it is said. These people aren’t going to be robo-called by investment firms wanting their business. It is simply too easy for them to get lost in the morass with little idea of where to turn for assistance.
And that’s where the personal connection comes in.
Everyone is different and has a different set of circumstances that absolutely must be accounted for when preparing a Retirement Plan. Person A is single, plans to remain single and wants to retire at age 60. Person B has two kids with a third on the way and already knows working until 65 or even 70 is a strong possibility. Person C wants to take care of her parents as she (and they) get older. Person D is looking forward to helping pay for college for the grandkids someday. Person E wants to travel. And on and on it goes, with no person having the same financial situation. But too often overlooked in financial planning is that these folks also will not have comparable LIFE circumstances.
How We Can Help
This is where a small firm like ours comes in. I really enjoy that challenge–solving that difficult puzzle which is just as fundamentally different for each client as is their skin, hair color, eyes and height. It isn’t just how much money will you have when you retire. It’s a lot more than that. Where will it come from? How much will come from taxable vs. tax-deferred accounts? When should you take Social Security? When do you want to retire? Do you want to work part-time? These are just a few of the many questions I ask when working with someone on a Retirement Plan. Notice that only one of those questions was “how much” related. Your Retirement Plan is a joint working document we both create together, asking and answering questions (in both directions) throughout the process.
If you are starting your career, winding it down and beginning to count the months until retirement, or anywhere in-between, and you do not have a personalized Retirement Plan, I hope you’ll strongly consider how valuable it can be. And if you’d like us to help, I’d be honored and privileged to do so.
