Planning for retirement income is hard. When it comes to Saving for retirement, everyone seems to have an opinion on the best hot stock pick, the next tech stock, the right mix of bonds/stocks, etc. The media is not short on ideas and it seems every neighbor has a nephew that can manage your investments for you!
When it comes to Income Planning in retirement, there are far less opinions and a lot more silence. Consequently, it can help to look to academic research (of which there is plenty). It also pays to get creative inspiration from other wisdom sources, such as the Navy. In particular, submarines offer a particular piece of wisdom that can directly affect your retirement income strategy.
“A place for everything and everything in its place.” You see, on a submarine, success is driven by purpose and discipline. When your space is confined, every single item needs to have a purpose and a place. It takes discipline, planning, and a strategy to ensure that the mission is carried out smoothly. Efficiency and purpose are intertwined and directed by a guiding strategy. Every item in the submarine finds its purpose and place within this guiding strategy.
“A place for everything and everything in its place.” Or to put it in financial planning terms, “Strategy drives the purpose and every dollar has a purpose and a timeframe.” In retirement income planning, every dollar has to have a job. That job could be to provide contractually guaranteed lifetime income. Another dollar could have the job of providing for long-term care. This dollar over here could be directed towards potential Long-Term Growth to provide for inflation adjustments later in retirement. That dollar over there could be assigned to being taking care of heirs and estate planning.
Regardless of how it actually plays out, every dollar needs a purpose and a time frame in which to accomplish its purpose. And like the submarine, each dollar finds its purpose through the overall guiding strategy. This strategy should be focused around the main objective, “providing retirement income.” The strategy should also include contingency plans such as accounting for inflation, reducing risk, providing for a longer time horizon, using each asset class to the best of it’s abilities, and providing for heirs in a way that you see fit.
As mentioned above, we can gain wisdom from other areas of life, and we can lean heavily on available research to construct an appropriate guiding strategy for your retirement income planning. It is not enough to have an idea of a goal, accumulate the resources needed to reach that goal, and call it done. A guiding strategy informs us as financial planners and you as client the best possible way to make every dollar count. A guiding strategy should be based on the best research and not just on our opinions. A guiding strategy can make the mission successful. Without it, the ship is aimless. Don’t you think your wealth deserves such a strategy?