The Ideal Financial Plan, Part 3: Live in Retirement
(Read: The Ideal Financial Plan, Part 2)
Next year will mark the 70th anniversary of Sir Edmund Hillary and Sherpa Tenzing Norgay’s monumental summit of Mount Everest – the first recorded in history. Since that day, over 6,000 mountaineers have reached the summit of Mt Everest with an average of 700-to-800 people attempting the climb every year1. Sadly, over 300 mountaineers have died attempting this amazing achievement. Of those, nearly a third of those deaths came during the descent after reaching the summit2.
There’s something to be learned from this sobering number when it comes to retirement planning. So often, financial advisors, including tax planners, attorneys, insurance agents, and investment managers focus the majority of their attention on reaching the summit of retirement with only a passing thought about the descent. There seems to be an assumption that once we reach the summit of retirement we’re good to go when in reality, as much care and planning should go into the retirement distribution and transfer stages as there was in the accumulation phase.
As stated earlier, it’s not what we earn or accumulate that is important with a financial plan, it’s what we actually get to keep and use. Therefore, an ideal financial plan not only guides us up to the summit of our accumulation goals but also helps us navigate our way down during the distribution phase and transfer stages. If you are confident in your accumulation strategy but may have some concerns about your income or distribution strategies, send a quick email and let's talk. I'd love to share some strategies that may help because retirement includes many of its own challenges and pitfalls if it's not navigated carefully. Effective distribution planning begins during the wealth accumulation phase and then incorporates investment risk management, current tax law, timing strategies as well as the efficient use of our different types of accounts to minimize the impact of taxes and market variance.
LEAVE A LEGACY
Once we’ve secured our savings and distribution objectives, it is important to plan for the legacy we will leave with our surplus wealth. A well-designed estate plan reduces taxes and directs the usage and contributions of our wealth. Those who fail to plan their estate will be consigned to the government’s estate plan, which is guaranteed to be less efficient, more expensive and runs the risk of using our wealth completely contrary to our values, desires and goals. The ideal plan not only outlines the growth and enjoyment of the wealth but also directs the transition of wealth to the next generations and the ongoing legacy once we’re gone.
When it comes to creating financial plans, we have to beware of the “nirvana fallacy”, which has nothing to do with music but addresses the tendency to assume that there is a perfect solution to a particular problem or to compare actual things with unrealistic, idealized alternatives3.
We like to define our futures like a blueprint of a home, but in reality, there are so many planning variables that can change throughout our lives, such as interest rates, inflation, market volatility, health concerns, goals, values, family dynamics, career progression to name a few – all of these can have a profound impact on our financial well being now and in the future. So, the only variable that we can truly count on in any financial plan we design is the variability of our plan variables. Thus, we simply have to do the best we can by creating options and flexibility and continually reassessing our plans and variables to course-correct along the way.
The concept of an ideal plan is not centered on controlling the uncontrollable but simply focusing on those things in our lives we can control or, at least, influence to put us in a position to succeed. As I stated in the beginning, the word “ideal” in this context is squishy at best but the principles outlined throughout this essay are the time tested steps to help you and your family grow and protect your wealth so you can focus on the relationships and activities that mean the most to you now and long after you’ve throughout your life. If your current plan seems to be lacking or your not getting the ongoing guidance you need, please send a quick email to email@example.com. I'd love to visit with you, answer questions and share the ways that we can help.
1 Gopal Sharma, “Climbers twice as likely to reach Mount Everest summit but "death zone" crowding soars, study shows,” Environment, 2020
2 Himalayan Database
3] Anne-Laure Le Cunff “The Nirvana fallacy: when perfectionism leads to unrealistic solutions”, Ness Labs Academy