RETIREMENT MY WAY – FINDING AND LIVING YOUR “IT”
Look around you – at your immediate and extended family members, your friends, your co-workers, folks you meet in passing every day. Who are the happiest people you know?
In all my years as a financial advisor, retirement specialist and citizen of the world, I’ve discovered that it’s not the lottery winners. It’s not the pro athletes that make the millions most of us can only dream of, or the CEOs of companies who have obscenely rich compensation packages and perks.
No, it’s none of those. From my experience, it’s those that find their “IT” – the things in life that bring them the most joy – and have discovered the financial means to embrace their “IT” on a daily basis and follow their bliss. At Summit Financial Partners, it’s often the clients who have pensions. Those who live what we call “Retirement My Way” have incredible peace of mind knowing that they can live their lives and achieve their “IT” within reason, as long as their goals are within the reach of their pension and monthly Social Security benefits. We use guaranteed investment tools to help our clients create self-directed pensions.
A Self-Directed Pension may be suitable for experienced investors who want to manage their pension fund investments themselves. It gives you access to invest in a range of index options. It allows you to decide how your pension is invested; change how you invest your contributions at any time; and add to your pension fund whenever you wish. I often suggest this option for experienced investors who are looking for control over their investments. I’m happy to report that our clients have experienced excellent returns with self-directed pensions.
Obviously, the kind of happiness I’m talking about when I mention those with pensions isn’t on the level of those whose wise investments allowed them to ride out the financial storms that were crashing on everybody in 2008. That brings up another aspect of retirement planning that I am a huge proponent of – ROI. In my book Taking Stock, I discuss in detail what I call “The Two ROIs.” Generally speaking, when I say ROI (Return on Investment), I’m talking about the benefit to an investor resulting from an investment of some resource. A high ROI means the investment gains compare favorably to the original cost of the investment. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different ones. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.
I’ve found that it’s the second ROI – Reliability of Income – that matters the most. This simply means knowing that your money is safe and that you’ll have guaranteed income month after month, year after year, for as long as you live regardless of what goes on in the stock market. I explain to my clients that it’s no longer about how big their accounts are, dollar or size wise. Rather, what matters now is the size of their guaranteed income. In planning “The Second ROI” phase of retirement, we first must consider the basics – i.e. the costs of being retired and how much money people need to meet their monthly expenses. Important issues to consider are taxes, long term care and health care, and their basic living expenses, mortgages and rent, utilities, food – all the things they had to think about when they were in the workforce.
I recently had two couples, Sam and Dottie, and Steve and Janette – come in, envisioning an imminent retirement but fearful that they might not have enough to do it. We built out income for life plans, making sure to max out their foundation income of their monthly SS benefit and pension. We analyzed the difference between what they needed and what they had guaranteed, and addressed that income gap. In particular, I helped Janette create a lump sum pension.
In general, after we identify a client’s income gap, we factor in inflation so they can keep their same lifestyle. Both couples had the same concern coming in the door: Do I have enough? What happens with my pension? What happens when we experience another 2008?
Using our specialized financial tools, our job here is to ensure that we position enough money that is protected from stock market loss, and to close that gap by providing guaranteed income for life. Both of these couples were able to achieve their income goal, allowing them not only to meet their basic needs but also go the extra step and enjoy their “IT.” For a lot of these retirees, their “IT” is having more time to spend with their grandchildren. One of the couples I mentioned actually bring their granddaughters into our meetings, as if to show me what they can do now because of the way I have helped them. It’s not always just about how much they accumulate and the size of their nest eggs. Their bigger picture is, “Can I live my life my way, enjoy time with my grandkids, travel, enjoy golf…” or whatever their “IT” happens to be.
Remember, our concept of “Retirement My Way” is built on you – analyzing your assets, your needs, your goals and, most importantly, helping you find, embrace and live your “IT!”