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Linnard Financial Management & Planning, Inc.
Fee-Only Financial Planning and Investment Advisor
Economic conditions have changed over the last decade or two. The economic growth rate has fallen as the level of personal, corporate and governmental debt has increased, and as the size of the labor force has declined relative to the population. The baby boom generation has begun to retire in record numbers. Instead of saving and buying investments, they will be selling investments to withdraw funds to support retirement. This dynamic, plus the current high price of both stocks and bonds suggests that investment returns will not continue to be as strong as they have been since 1980.
Have your retirement savings been set on cruise control? Or have you re-evaluated your capacity to meet your retirement needs in today's "new normal" environment? Have you projected what you expect your savings to be by the time you retire, or have you assumed that the target-date funds in your company's 401(k) will deliver for you? Do your projections use historical average returns, or are they based on the likelihood of lower returns going forward?
When re-evaluating retirement, the first thing to do is to recognize that the financial world is changing. In every change there is potential opportunity. You can resolve to work with the new environment and develop a new, better and stronger plan for your future.
It is important to recognize what a retirement plan is, and what it is not. A good retirement plan identifies your goals, estimates what your living expenses will need to be in order to reach the goals, and identifies what financial resources will be needed to support the retirement lifestyle you want. It determines what actions you should take, and what adjustments you should make to assure that your financial resources are expected to last for your lifetime.
Hoping for a continuing strong economy is not a plan. A retirement plan is not a 401(k) or IRA. It is not an annuity, nor is it a pension or life insurance policy. These are financial resources that may support your retirement plan, but they are not a plan.
If you developed a plan in the past, and you are still on track with its projections, you should stay on your course with some sense of relief, but watch very carefully and take defensive action when hign market valuations begin to normalize.
If you have not yet entered retirement, and your plan was set back by the effects of the stock market and real estate market crashes, or it does not adjust for currently high investment values, then evaluating your retirement position is warranted. Can you comfortably absorb the shock of another one of those inevitable bear markets like the two that occurred between 2000 and 2009, which effectively lost eleven years of retirement growth? These types of periodic economic storms can be expected, for they repeat with some regularity. It is suggested that you periodically re-open and review your plans. Identify what changes must be made to reflect new economic realities, and update your current financial resources.
If you are in retirement already, it would be wise to review your resources and life style to make sure that you know if changes are necessary.
If you are approaching retirement and have accumulated some financial assets, but do not have a plan that you can trust, consider laying out a detailed approach as early as you can. The younger you are, the more time you will have to accumulate the resources you need. If you have a clear plan, you are less likely to overspend, make an inconsistent investment decision, or buy some financial product that you do not need.
If you need to build or review your plan, we have included a section on this site that discusses the essentials of retirement planning. You can use this information to see whether your plan has the basic issues covered, and what you might expect will be considered in your plan if you engage a financial planner to help you. If you decide to use a planner’s services we suggest you seek a Certified Financial Planner TM who acts as a fiduciary like LFM&P, does not sell financial products, and does not accept commissions.
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