Recently, I had the pleasure to meet someone at a networking
group who I think is more common than we’d all care to admit. This particular gentleman - let’s call him
Joe – happened to mention that he and his wife were with an adviser at a
national brokerage firm.
He stated that while he was confident in his abilities of
his adviser to pick a “good” portfolio, he wasn’t pleased that he really had no
retirement plan or idea of when he could retire. But he did say that somebody recommended they
take out a permanent insurance policy on his wife but he couldn’t remember why. All he knew was that it was costing them
$140/month and there’s no way he was going to take out a policy on himself.
(By the way, exactly what is a “good” portfolio
anyway???)
I sat back and just listened to Joe, who clearly was not
pleased even though they had managed to save quite a bit for retirement. At the same time, I could tell he had very
firm beliefs about finances and investments.
I asked him very simply how he was going to ensure his “good”
portfolio was going to provide enough money to maintain their lifestyle and
last for as long as they live. He looked
at me as if I had asked him to solve the mysteries of the universe, and offered
this response:
“I’ll take my chances.”
And with that, we were off meeting other people at the
event. But his statement stayed with me,
and I thought – is this what most people think?
After all, the math of retirement planning is quite
simple. Just consider a few items:
How much you need per year to live
How long you’re going to live
How much you’ll earn on your investments / savings
What future tax rates will be
Plug in all 4 numbers into a magic box, and poof! Your answer is how much you need for
retirement.
Simple, right?
Of course, the problem is that each of those variables is
just that…variable! Nobody has any idea
of what those numbers would be. Additionally,
research is showing that there are 3 distinct phases of retirement, each
requiring a different amount of money.
That’s highlighted in this article.
Therein lays the complexity.
And depending on what those variables are, that could mean the
difference between a very comfortable retirement filled with travel or a
retirement living in a small apartment eating cat food.
To each his own. When
I walked away, I felt bad for Joe. At a
minimum, wouldn’t he want to know the range of possibilities in his situation? Wouldn’t he want to make some of those
variable more certain? At least know
that he and his wife won’t be eating cat food?
Is “I’ll take my chances” the common answer to this
situation?
Would you want to know what’s in store for your future?
