Driving Blindfolded to Retirement

By Peter Klein on September 29, 2023

Of course, no one would ever drive a moving vehicle blindfolded. Yet, many investors today are doing just that with their finances instead of their cars. I am here to strongly defend the art and financial science that goes into creating a financial plan.

Many investors may fantasize about throwing out their alarm clocks and enjoying weeks on end without a Zoom meeting, but these dreams can quickly turn into nightmares when they start thinking about the “How to”. How are they going to fund these dreams and maintain their idyllic lifestyle once they stop working?

Americans, it has been shown, spend more time planning vacations than planning for their financial future. That does not strike me as a strange statistic. Financial planning is difficult, requiring specific skills in understanding investment returns, tax planning, and estate planning whereas vacation planning is much more enjoyable. Why? Because once folks realize the amount they need to spend during their retirements, which are starting earlier and earlier, they often become distraught and resort to “the ostrich” approach, also known as “head-in-the-sand”. Put it aside and postpone it for another time. It will be alright. This type of thinking often results in procrastination when it should encourage engagement. When you don’t want to do the work yourself, you can seek a professional advisor who possesses extensive knowledge and experience in financial planning.

Being a fiduciary means that we do not “sugarcoat” these issues. Instead, we map them out using robust software to illustrate the unimpeachable mathematics behind cash flow-based planning. “Mr. and Mrs. Jones, as you can see in this exhibit, your expected spending in retirement is not supported by the growth of your assets. You will run out of capital before you turn…”

Okay, so the Joneses may not be super happy to hear this news and may even hold it against their advisor. However, the facts remain that they need a plan to move towards retirement in a responsible manner. For many pre-retirees, there are no magic bullets to help them reach their retirement goals. They may need to make difficult choices now, such as spending less, saving more, reallocating their savings into portfolios with longer-term capital appreciation, and possibly even retiring later. A financial plan can clearly demonstrate the impact of these choices on their financial future. A plan to achieve those dreams and vanquish the nightmares. It’s not easy for some, but it’s a wake-up call for many. Working with a fiduciary-centric advisor who can explain the importance of making those tough decisions today can lead to better retirements in the future.

So, what is a financial plan? The term has been discussed for decades. A simple explanation is a cashflow-based exhibit that examines your current financial situation (income, spending, savings, asset growth) and future scenarios (retirement at 65, relocation, buying a second home, helping your children get started). The plan clearly shows the amount of money involved in each scenario. Since this is an iterative process and not an exact science, we aim to create as many scenarios as possible to help ensure that the plan has it covered. Because the financial plan is math-based, it is also unemotional, eliminating the kind of pixie-dust thinking that simply, and irresponsibly, states that “everything will be okay”. If you cannot input a figure, then it doesn’t count. The financial plan is unemotional in that way, using math’s exact science to provide a clear gut check to one’s financial future.

Going deeper into the financial planning process, we often discuss estate planning and legacy planning as well. These elements seek to ensure that a family’s wishes after their demise can be carried out using trusts and other legal documents. Ultra-high net-worth families also seek our counsel to assist them with their legacy planning. This often leads us to the family’s philanthropy to ensure that legacy, whether through Donor Advised Funds or Family Foundations.

ALINE Wealth is dedicated to the financial planning process, and we welcome you to contact us for a complimentary discussion on how we can help you and your family develop these strategies and work alongside you to help ensure a responsible financial future. Contact us at aline@alinewealth.com or call us at (631) 760-7639.