The key to setting retirement goals? Details


“A well-set goal is halfway achieved. – Zig Ziglar. We all have retirement goals, but unfortunately we tend to be very vague and evasive about them.

Most investors will tell their financial advisor that they would like to “retire comfortably” or “keep their current lifestyle”, but what does that really mean? Many advisors tend to avoid the issue of goal setting because it places more emphasis on measurable milestones and therefore accountability to their clients. Investors also tend to undermine this process, as they are also used to being inexplicable to minimize future feelings of guilt for not achieving their goals.

Whether you are already retired, near retirement, or in your best earning years, setting specific and quantifiable investment goals is paramount to achieving them and essential to the success of the investment (in the next column, I explain why “beating the market” is a silly and meaningless act. goal).

Step one: ask yourself this important question

Start by asking a very simple question with a very complex answer: “What I want?” Then write down the answers (if you have a spouse or other significant person they should do the same exercise and then you can compare the scores).

Once you’ve identified these specific goals, determine what you expect those goals to cost. For example, if your goal is to travel three times a year to different continents and pay off your house in five years, figure out how much it will cost you. Remember to take inflation into account. A 3% per year ballpark is a good place to start.

Step two: take costs into account

Next, list your lifestyle choices and their costs i.e. how much day to day living costs. Estimate the cash flow your portfolio (excluding other income) will need to generate to support this.

By now you’ve probably assumed that your dreams and aspirations cost a lot of money, and your portfolio would have to generate monstrous returns for you to achieve your goals, and that’s okay.

Third step: prioritize

Now comes the hard work! It is time to prioritize goals and have contingency plans in case some returns are not achieved within a given time frame.

For example, suppose you have $ 2 million in IRA, 401 (k), and other investments, your $ 750,000 home is paid off, and you receive $ 2,000 per month in Social Security. You estimated your daily expenses at $ 10,000 per month. This means that your portfolio will need to generate $ 8,000 per month ($ 96,000 per year) in cash flow for you to meet these expenses. This equates to a withdrawal rate of almost 5%, which by most standards is considered unsustainable over long periods of time without capital depletion.

Keep in mind that if you are 65, there is more than a 50% chance that you or your spouse will live to age 90, which means inflation and unforeseen costs will have an increasing impact and you Haven’t traveled the world yet or done any of the other things on your Goals List.

Prioritize and innovate – what if in 10 years you take out a reverse mortgage on your paid home? This injection of $ 250,000 in cash changes the calculation to a withdrawal rate of just over 4%. Simply put, have aspirations and dreams, prioritize them, and then tailor their costs to your assets.

It’s a lot of work, but you’ll be able to sleep soundly knowing that you have a well-thought-out plan and that you’ve factored in the predictable variables.

The rest of the series

This column is the first in a six-part investor education series.

  • Column 1: Understand your goals
  • Column 2: Why comparing yourself to the S&P 500 is not a good strategy
  • Column 3: It’s a question of cash flow, no returns
  • Column 4: How much do you pay for your wallet?
  • Column 5: 5 essential questions to ask your financial advisor
  • Column 6: ‘Senior Inflation’, the not-so-silent retirement killer

CEO, Bruderman Asset Management

Oliver Pursche is the chief market strategist for Bruderman Asset Management, an SEC-registered investment advisory firm with over $ 1 billion in assets under management and an additional $ 400 million under advice by the through its affiliate broker, Bruderman Brothers, LLC. Pursche is a recognized authority on global affairs and investment policy, as well as a regular contributor on CNBC, Bloomberg and Fox Business. In addition, he is a monthly columnist for Forbes and, a member of the Harvard Business Review Advisory Council and monthly participant in the Federal Reserve Bank of New York CEO Survey, and author of “Immigrants: The Economic Force at our Door”.

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