Financial Planning and Retirement Planning for an Uncertain World

There seems to be an endless supply of financial planning advice. However, many people still have no idea if they are on track in preparing for a comfortable retirement. Generally individuals will need the assistance of a financial planner to help them accurately determine how much money they need to retire comfortably. Experienced financial planners use a variety of software programs to analyze and project possible financial outcomes and probabilities of success.

The number #1 goal of most retirees is to make sure they have enough money when they retire so that they will never run out. Some retirees have secondary goals such as leaving a financial legacy for their heirs or donating money to certain charities. Working with a financial advisor to develop your personal financial plan will force you to think through many important aspects of your future. Most people feel much more at ease about their financial future once they have a financial plan that can serve as a roadmap and reduce uncertainty.

You should have the following information with you when you meet with a financial planner in order to prepare meaningful and useful projections:

1. A list of your assets and liabilities- Be sure to include the balance as well as the type of account such as IRA, 401k, Trust account, Individual savings account, etc. You should include your home as an asset and your mortgage as a liability.

2. Estimate of needed Income- In the past many financial planners assumed that you would spend 70 - 90% of your pre-retirement income once you were retired. However, today's retirees are enjoying longer more active retirements and spending more money as a result. Therefore, we generally recommend that you use 100% of your current income minus retirement plan contributions.

For example:
if you currently earn $100,000 but defer 10% into your company retirement plan, then you may want to plan on $90,000 as your needed retirement income. Your income requirements need to be inflated each year to account for inflation. The average inflation rate over the past 30 years has been 4.1%. (Source: U.S. Department of Labor Statistics Consumer price Index averages from 1978 - 2008)

3. Income Sources in Retirement- You need to have an estimate of your Social Security Benefits and Pension (if applicable). Does your pension have a cost of living adjustment?

4. One time Cash Inflows or Outflows- Are you going to be selling your residence and adding those funds to your investable assets? Do you plan to pay for a child's wedding? One time inflows or outflows can have a big impact on your retirement plan's probability of success, especially when those inflows or outflows occur early in retirement.

5. Other Assumptions- How long to you want the money to last. It is common to underestimate how long you will live. Do you want to plan for your money to last to age 85 or age 100? You may be surprised to find out that the average 65 year old couple has a 41.9% chance that at least one of them will live to age 90, a 15.9% chance at least one will live to age 95 and 3.2 % chance that at least one of them will live to age 100. (source Social Security Administration)

Financial planning and specifically retirement planning involves gathering all of the information above, thinking about how you want to spend your retirement and then selecting the investments / investment strategy, insurance coverage and estate planning documents that will give you the highest probability of achieving your financial goals with the least amount of risk.

Many people recommend that you use a Financial Advisor to help you. When looking for a financial advisor, you may want to limit your search to CERTIFIED FINANCIAL PLANNERS. The CFP is the most recognized credential in the financial planning industry. In addition many industry resources specifically recommend Fee Only Certified Financial Planners or Fee Only Financial Advisors as they do not have any built in conflicts of interest.


If you have questions or comments about this or other financial planning issues, please contact Jeremy Kisner, CFP® at (702) 256-7400. Mr. Kisner is the President of SureVest Capital Management, a fee only financial planning and wealth management firm with offices in Las Vegas, NV and Scottsdale, AZ. The firm serves as financial advisors to mid and high net worth clients on a wide range of financial issues and manages investment portfolios for clients which range from $250,000 to more than $10 million.

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