Written by Alex Seleznev, MBA, CFP®, CFA | Nov 27, 2024
I must admit, there is something to be said about financial planning being more of an art than a science. Or science-based art - if such terminology even exists.
A few weeks ago, I finished working on a retirement plan for a couple in their early 60s. I will call them Jon and Donna. They’ve amassed a sizable portfolio of almost $2.3M and felt like they had enough to retire “soon.” They were mostly seeking advice on what exactly “soon” would mean in their case.
Last year, Jon and Donna worked with a financial planner who suggested they needed to work for at least 13 (!) more years to comfortably retire. The planner delivered what looked more like marketing material, consisting of over a hundred pages of analysis filled with elaborate graphs and fancy words.
The problem was, the plan didn’t solve their specific issue. It didn’t specify exactly how they could retire “soon.” If anything, it left Jon and Donna more concerned about their finances.
Since I specialize in retirement planning, they reached out to me for a second opinion, as something simply didn’t add up in the plan they received last year. Initially, to Jon and Donna’s surprise, we found that even with our approach, the “benchmark” projection showed they would need to work 11 more years to retire comfortably.
But we certainly didn’t stop there.
In our initial meeting, I specifically asked why they wanted to retire soon. What is it they were seeking that they couldn’t do now?
One of their top priorities was to visit their son in North Carolina who had three young children. In fact, when I reviewed their spending plan, I immediately noticed their travel expenses were much higher than would normally be the case for those working full-time. When I asked them about it, Jon and Donna clarified that most of it was for flights, hotels, and car rentals in North Carolina. They were visiting their son almost monthly which is why the total was so high!
This is where the “what if” analysis really comes into play.
What if they sold their house in the DC area and moved to much lower-cost housing in NC? This is one of the “what if” scenarios we covered in our planning meeting.
This potential decision had a dramatic impact as it eliminated the need for most of their travel expenses and significantly reduced their housing costs.
When I designed and presented this “what if” scenario to Jon and Donna, they discovered that they could safely retire in only 5 years while achieving the lifestyle goals they had. This is 8 years sooner than the original plan, which focused only on the numbers without going deeper into their actual preferences.
How is this important to you?
When you review and design your financial plan, make sure it considers your actual circumstances.
I’ve seen many generic plans that simply target a specific age or income number for retirement.
The truth is, most plans like this are essentially software-generated templates requiring only a few variables to generate the “results.”
This is fine as a starting point, but these are not particularly thoughtful or holistic roadmaps to achieve your personal goals and objectives.
The last thing you want is to wake up years from now and realize you sacrificed precious moments chasing unnecessary savings instead of living the life you dreamed of.