The concept of GPS – the same way you get from point A to point B on a road trip – is something we believe can be used to secure your retirement. In fact, we want to talk about what we call the GPS Retirement System.
We really like the GPS analogy because you can use it to find your way to financial security and wealth in retirement.
However, before we begin, let’s start with a question that we ask when using this system.
What’s the Most Important Part of a GPS System?
If you said “the destination,” that’s true, but you also need to know where you’re at currently. When trying to find your way to a secure retirement, you must know where you are in this very moment.
During the journey, there may be accidents and detours along the way, and our GPS Retirement System will help you get back on track.
How We Identify Where You Are
Where we are today is very important, and we start working with every client by finding out exactly where they are financially so that we can figure out how to get them to their retirement goal.
A lot goes into this initial process to ensure that we help you get to the retirement you want.
We start by asking:
- Are you currently working?
- When do you plan to retire?
These two questions allow us to know when income will stop coming in from your job and when you’ll need to dip into your retirement. Of course, we will also want to know about other forms of non-employment income that you have, such as:
- Pension (potential survivorship)
- Social Security
- Rental property
- Business sale income
- Part-time or consulting that you may consider
If you’re not taking Social Security, we’ll also run an analysis to determine when the optimal time for you to take Social Security is.
We will work to understand your full income potential so that we know how much money you’ll have coming in during retirement. Next up, we’ll also need to know about the assets that you have accumulated over time.
Asset Considerations
Assets can also help you get through detours and roadblocks on the way to retirement. Some assets include:
- 401(k)
- IRA
- Brokerage accounts
- Annuities
- Insurance policies
- Savings and checking accounts
- Property
Assets are so important because they help fill in the blanks for us. You may have properties that generate a positive net income every month and annuities that can help cover a large chunk of your expenditures each month.
There’s also the possibility that you may sell a home or downsize to help fund your accounts or save more money each month.
Once we consider all of your income and assets, it’s time to look at expenses.
Expense Analysis
Now we have all of the information in the GPS System to understand how you can get to your destination, but we have to consider roadblocks. One of the major roadblocks people experience during retirement planning is their expenses.
If there’s one area that can make or break a retirement plan, it’s going to be your spending.
We need to know:
- Flat expenses: Mortgage, car payment and any account with an end date.
- Needs: Pay the bills, go out to eat, entertainment, etc.
- Wants: Travel, second home and other fun things.
We often create a “fun fund,” and this would be the fund to travel heavily when you first enter retirement and want to travel or whatever “fun” you want to have.
Knowing what you “must” spend is time-consuming. Often, people know they have enough income to pay their expenses, but when you hit retirement, you will be drawing from retirement accounts, so it’s crucial to know what you’re spending your money on.
Plugging These Figures into Our Retirement System
At this point, we have a lot of retirement information available that can help you get to your retirement goal. And through our system, we’ll plug all of these figures in to have a better idea of how to get to your retirement goals.
Unfortunately, there is always one variable that we can’t account for fully: retirement length.
We can always base the retirement length on life expectancy, but there are some people who will be retired for 40 years and some 1 year – we just don’t know.
Our goal is to make sure your account will last until you’re 90.
We’re extremely conservative with these estimates and will account for:
- Inflation
- Healthcare
- Investment growth (very conservative rates used)
Now, looking at this information, we can determine if you can get to the retirement destination on your GPS.
We like to create scenarios and adjust them to find out the best way to reach your goals. For example, you may find that you need to cut back expenses by $500 a month, and instead, you would rather go into consulting a few hours a week instead.
Unfortunately, getting to your destination is never easy.
There are roadblocks, detours and other issues that pop up along the way. However, when we have all of these baselines in place, we can then run simulations every year to ensure that you’re doing everything right, year by year, to reach your goals.
If you have a long-term care scenario occur, your plan will obviously change a lot.
Running simulations allow us to predict what will happen in the future based on numerous variables, such as a spouse passing away, long-term care being needed, more money coming in or going out, or other scenarios.
The GPS Retirement System considers all of these variables, including the fun ones.
Once we have a baseline set, that’s when we can see all of the great things that come out of our hard work today. Perhaps you’ll have enough money to travel the world for a decade, and this is something we can simulate.
All throughout retirement, we can run simulations on things like:
- Going into a continuous care community
- Remodeling your kitchen
- Buying or selling your home
- Helping pay for your grandkids’ education
- Moving overseas
- Virtually anything
If you want to secure your retirement, the GPS System works very well and allows you to account for the unknown variables that inevitably pop up in the middle of retirement.
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