Answering the “Four How Questions™” For An Ideal Retirement

“Sophia” (name changed) is a successful and dynamic restaurateur. She recently engaged us to create our proprietary “Critical Actions Roadmap™.” Through our planning process, we can then spot issues, and make observations/recommendations in the following areas:

• Retirement
• Estate planning
• Investments
• Insurance
• Philanthropy & legacy

Despite her great financial success in building a profitable business, Sophia has not saved anything outside of the business towards retirement. Instead, she has poured all her money (as well as her time and effort) back into the business.

From my research and experience, unfortunately, this is not unusual. There are too many “Sophias” out there that have little to no money specifically set aside for retirement. How about you? How much have you saved for retirement thus far? Are you satisfied with that? How much should you save to be able to retire at a specific date and with the financial security you wish?

The topic of this month’s newsletter comes from our new video series: Mistake #1 – The Top 10 Planning Mistakes That Will Keep You from Retiring Well . . . (And What YOU Can Do About Them!) If you are a visual or auditory learner, the video is under seven minutes. Otherwise, in this month’s “Imagine That™!”, we will address the underlying issues concerning this important topic . . . starting with a disturbing survey which recently caught my eye . . . .

What Percent of Americans can Cover a $1,000 Emergency Expense?

According to a January 2018 Bankrate Survey of Americans:

• Only 39% have enough savings to cover a $1,000 unexpected emergency expense
• 61% would need to fund that expense with either:
  • Using a credit card
  • Spending less in another area(s)
  • Borrowing from friends or family
  • Taking out a personal loan

Obviously, these statistics indicate far too many people are living paycheck-to-paycheck – and if they do not have $1,000 set aside for an emergency expense, how will they ever be able to retire?

What Percentage of Americans Have Money Saved for Retirement?

A 2019 Northwestern Mutual Planning and Progress Study found:

• 15% of Americans have nothing saved for retirement
• 22% have saved less than $5,000
• 46% aren’t even sure what they have!
• 45% fully believe they will outlive their retirement savings
• 47% expect to work past age 65 “out of necessity” – not because they plan to work because of enjoyment. The number one reason why they will continue to work is because they did not save enough to comfortably retire

Don’t blame the poor retirement saving statistics on the Millennials. While they are a factor in the above results, the preparation of Baby Boomers for retirement is not encouraging:

• 20% of American Baby Boomers have less than $25,000 in retirement savings!

So, Where Do We Start? What are the “Four How Questions™” to Achieve Clarity?

In meeting with business owners and professionals for more than 30 years, I have yet to find someone who had specific answers to the “Four How Questions™.” Without answers to these questions, it is impossible to nail down your retirement planning. The “Four How Questions™” are:

• How soon?
• How much?
• How many?
• How long?

Why is Answering the “Four How Questions™” so Important?

In my opinion, the number one reason why most Americans will not be able to retire well is due to a lack of specifics – and that includes not having a written plan for achieving financial independence in retirement.

How would you feel about playing a game where there are no yard markers? No end line . . . nothing to tell you if you scored or not? Somehow, I think you would either get bored quickly or simply not participate. That’s exactly what I find with 99% of Americans concerning their retirement planning. They don’t know where the goal lines are. They can’t tell me specifically:

• How soon exactly – the month and the year – they will retire or at least slow down
• How much they are going to need at that point and going forward
• How many different buckets they will have income to draw from, and
• How long they expect to live. Many people are unrealistic about how long they may live based upon the latest information. (Hint: it’s a lot longer than most people realize!)

Stephen R. Covey, in his classic book, The 7 Habits of Highly Effective People, taught us, “Begin with the end in mind.” This is especially true with retirement planning. Most people simply have not envisioned what they want for their retirement.

What Are Some of the Retirement Questions You Should Be Asking Yourself?

In our Critical Actions Roadmap™ process, we have a “Discovery Document” that addresses various areas of concern. In our Retirement Planning section, we start with the following questions:

• What does retirement look like to you?
• Do you have any specific questions, concerns, expectations you would like to have addressed and answered? If so, what are they? (Make a list!)
• When you do actually retire, which of the following answers best describes your intentions for the use of your time?
• Do you plan to stop work completely
• Will you volunteer? If so, how many hours a week and for what organizations/causes?
• Will you keep working? If so, how many hours/week? Is that possible or will you need to change your career – company – setting – focus/area of work?
• Will you start something else entirely? If so, what? What does your spouse or partner think of this plan? Your children or other family members?

Depending upon their answers to questions like the above, we then start describing various scenarios. Clients answer questions for these scenarios regarding the amount of debt they will have, the travel they will do, estimates of cost for certain items or situations, their legacy considerations, etc. With this, we can help them determine the likely amount of current income they will need to replace in retirement. Is it 75%? 85%? 105%? More?

Note: The above questions are simply a small sampling of the in-depth questions asked in our Discovery Document to ensure your retirement will be properly planned and well executed.

Conclusion: Answer the “Four How Questions™” and Begin Your Retirement Planning Today

It is critically important to answer the “Four How Questions™” to gain clarity on what an “ideal retirement” looks like to you. As a Retirement Income Certified Professional (RICP), let me help you process the answers – and then address the subsequent set of questions that will come next. Because of my concern over American’s lack of preparation, we now offer a 20-minute complimentary consultation to brainstorm each unique situation. Let me tell you candidly what I like about what you are currently doing, and ways to improve your plan and make it better. Let’s also address the perils which could threaten your ability to retire when you want – and in the comfortable manner you, or you and your spouse/partner, wish to enjoy.

Your financial future is at stake. Most will spend more time planning a vacation than creating a plan for the rest of their lives. Make sure your plans are built on the most solid of footing. It is possible to plan your future – starting today – so you can achieve the retirement of your dreams . . .

Retirement sign image by geralt on Pixabay

Stressed couple image by: unknown author, Canva, one design use license