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3-2-1 Retirement Newsletter (2-13-2020) Thumbnail

3-2-1 Retirement Newsletter (2-13-2020)

3 insights, 2 findings, 1 action (February 13, 2020)

5-Minute Read

Happy Thursday!

Thursday is here, and it’s time to share three insights, two findings, and one action.

I. Money is only part of the equation

It’s said money has no value in and of itself. It’s one of many tools to purchase the things we value. Equally as important as saving for the future is having some vision of what that future will look like. Having both savings and an inspiring vision of your future will help you successfully transition into your next phase of life. This starts with understanding four core retirement planning principles: Vision, Balance, Work, and Successful Aging.

Is your retirement planning missing these four core retirement planning principles?

II. Believe you can retire and you’re halfway there

Retirement planning can be overwhelming, but starting with the important first step will help your planning feel manageable. That step is believing retirement is possible in the first place. After that, you’ll create a vision of the retirement you want and lay out a strategy to support that vision. You can work with a financial professional to help clarify the vision and craft a strategy, but you must first believe retirement is possible.

Do you believe you can retire? If not, what are the obstacles in your path? 

III. Don’t let your retirement dreams be just dreams

Dreams will always be dreams unless you set goals to achieve them. If your retirement is stuck in the dream stage, you must translate those dreams into goals. A system I frequently use is the SMART goal planning system. This system requires creating goals that are Specific, Measurable, Achievable, Realistic, And Trackable. 

An example of how this would look in the context of retirement is: 

Dream: I want to retire someday


II. Four out of five Americans fail when quizzed on how to make their nest eggs last

Just 20% of retirement-age Americans can pass a basic quiz on how to make their nest eggs last throughout retirement. A large majority of people ages 60 to 75 with at least $100,000 in assets lack the knowledge they need for a financially secure retirement in areas such as life expectancy, Social Security, long-term care needs, investment risk, and more.

Key Study Findings:

  • A majority lack knowledge when it comes to an understanding of how to preserve assets in retirement.

  • Many are perplexed about when to claim Social Security and how to make the most of their benefits.

  • Most grapple with the risk of depleting savings by showing a lack of knowledge about how much time people should spend in retirement and that the time closest to retirement is the riskiest period for their retirement.

  • Many demonstrate a dearth of knowledge about investments, specifically bonds. They generally don’t understand that bond values fall when interest rates rise, and that small company stock funds have a higher return over time than other investment funds.

Source: Four out of five Americans fail when quizzed on how to make their nest eggs last

II. The search for retirement income

Does a half million dollars today sound better than, say, $2,500 a month for the rest of your life? According to a recent survey, most people would rather take the half million dollars, the lump sum from their 401(k), overusing those same funds to purchase an annuity to fund their retirement income strategy. The study suggests this is partly due to people not being comfortable with losing control over their hard-earned savings and having a lump-sum mentality when an income mentality is needed in the draw-down stage of their financial lives. The article points out that people should start thinking less about just accumulating money and more about how to make that money work by turning it into an income-producing asset. 

Source: The search for retirement income


I. One task you must complete to successfully transition into retirement

Well-established research indicates there are 15 developmental tasks you need to complete while still working to transition into retirement. 

We’ll look at one of these tasks for our action item this week and reveal a new one each week.

The completion of these tasks does not suggest a person should retire. However, failing to complete the tasks will put a successful transition into retirement at risk.

This week’s task is associated with income and benefits: You need to evaluate how economic changes will affect your pension, investments, and retirement benefits.

Why it’s important

  • Drawing down assets from a volatile investment portfolio can adversely affect retirement spending.

  • Poor investment performance can increase pressure on other assets and benefits.

  • Spending from a volatile investment portfolio is complex, stressful, and time-consuming.

  • Inflation can erode spending power which can decrease available income.

  • Tax increases,  public policy changes, and cuts to government programs can impact retirement assets and benefits.


Have a Question? Want to chat about it?


Until next week,

Mark Sharp, CFP® RICP® EA