I recently began working with a new client. I'll call him Bob (not his real name). Bob had just turned 60. His kids were all out of the house. He had a good start on his retirement nest egg with around $500,000 in retirement savings. He thought he was on track to retire in a few years, but this was based on some guesses about his spending and a free online retirement income calculator. As Bob began to stare down the barrel of retirement, a nagging feeling that he may not be as ready as he thought began to scratch at the edge of his mind.
As he put it, "I've been plugging numbers into these retirement calculators, but it feels like throwing darts blindfolded! They're like a black box that spits out a number, but I have no idea how realistic the numbers are."
Bob was not comfortable making the biggest financial decision of his life based on a free online calculator.
Bob exemplified a trait all my best clients have: the humility to admit when they don't know or aren't sure, then ask for help.
Not only that, but as he considered how investing would be different once he was retired and living off his investments, he began to get worried. Perhaps what had made him a successful investor while saving for retirement wouldn't make him a successful investor at generating retirement income.
So, Bob gave me a call and we set up a Discovery Meeting. Over the course of our meeting, three red flags began waving...
1) Hope is Not a Strategy
While he did have a great start on his retirement nest egg, he didn't have enough saved yet. There was still a gap that he needed to close before he could successfully retire – at least if he didn't want to worry about running out of money.
2) The Mystery of the Vanishing Paycheck
Bob had cash flow that was unaccounted for. He didn't know where all of the money in his paycheck was going. To try to provide advice on retirement funding without fully accounting for Bob's cash flow would be like a doctor performing surgery without checking your blood pressure and medications!
3) The Diversification Illusion
Bob was trying to play it safe. So, he had split his investments and put 25% into four different funds. This made his portfolio extremely aggressive even though he was a moderately conservative investor. Bob had no idea.
What Bob lacked was an overall strategic framework, which put him at risk of running out of money at some point in retirement.
Bob wanted to retire and spend his time on the golf course with his friends and family. He didn't want to spend time developing the expertise he needed to manage his portfolio once he retired. Even more importantly, he didn't want the weight of that responsibility.
So, after discussing our options, he turned management of his portfolio over to Wichita Wealth. We helped him create a strategic framework for his portfolio and finances so he wouldn't run out of money in retirement. After doing a cash flow analysis and accounting for all of his money in and out, we invested in a portfolio that was properly diversified.
Today, what was Bob's "Hope as a Strategy" is now a calm confidence because he has an overall strategic framework for his retirement finances. Instead of blindly throwing darts at retirement and hoping he hits something, he is spending worry-free time on the golf course knowing he has a professional in his corner keeping watch on his retirement finances.