As a JOYN Financial Advisor specializing in retirement planning, I’ve heard a wide range of questions on retirement. Yet, I generally give the same answer: It Depends. That’s because retirement planning is complicated, and no one wants to make big life decisions like retirement without fully understanding the context of their own situation.
Why? Because we are humans with emotions and big life-altering decisions and an uncertain future terrifies most people.
Most of us want the confidence that we will be okay, that we won’t run out of money, and that our families will be taken care of. Running out of money in retirement is a deep seeded fear, so people predictably want clear and defined answers. They rely heavily on heuristics and want accessible rules-of-thumb that show they are “on target” for the future.
Yet, retirement looks different for everyone — and why shouldn’t it? We all have unique, complex lives while we’re working so why would that change in retirement? For most, retirement is the single largest financial goal to accomplish in life, and yet there is such a lack of clarity around its fulfillment.
We believe three misconceptions stand out as pitfalls to successfully planning for retirement.
Misconception #1: “What’s Your Number?”
Public policy, media advertising, and the financial services industry has woven a particularly powerful retirement narrative into the fabric of our culture. Public policy has pushed more of the onus to save and pay for retirement onto individual workers and away from employers. Compelling advertising asks us “What’s your retirement number,” or tells us to “follow the green line.”
These play into our desire for heuristics, tugging on the emotional heartstrings that connect money with family and values.
The financial services industry continues similar approaches when navigating the retirement conversation: save more and spend less; add bonds to your portfolio; buy an annuity. How many of us have received a flyer in the mail asking us to “come to our steak dinner to learn more about how you can survive retirement”?
This has all created a great deal of anxiety and fear surrounding this future event known as “retirement.” Somewhere along the line, we got the message that what COULD be the most fulfilling, enjoyable time of our lives is actually fraught with peril.
At JOYN, we have a series of cognitive-based tools to help move clients from being manic or panicked about retirement to feeling centered and confident. Once centered, we believe then clients are in the best spot to make the best possible retirement decisions for themselves and for their loved ones.
Misconception #2: Valuing Only Assets Over Income
One reason for that lack of clarity is that our financial system works in assets. We are worried about our wealth: how much money is everything worth when added together? We focus on our rate of return on our assets and then we project into the future based on growing those assets.
Yet as humans we don’t spend assets – we spend income. And what is the cost of converting assets to income? Taxes. So why is most financial planning focused around growing and preserving assets instead of generating the maximum amount of spendable income? Because it’s much easier to work in assets.
The time, knowledge, and coordination that it takes to balance current and future taxation, fluctuating interest rates, and shifting markets are difficult to execute effectively.
Yet it can and should be done.
We at JOYN work with our clients’ CPA firms to integrate tax optimization retirement strategies and implement products that instill peace of mind in our clients when planning for the future.
Misconception #3: “Only Worry About Accumulating a Big Pile of Money”
A common retirement tactic is saving a “big pile of money” that’s ever-growing, grabbing a chunk of cash when expenses hit. However, this approach leaves a lot of chips on the table over time. In fact, it leaves LIFE on the table.
Imagine a retiree who has more than enough to safely navigate retirement. As a senior, that retiree may have a low tolerance for risk and a matching portfolio that mitigates loss (and growth). Eventually, that wealth will be passed onto the next generation.
But imagine if, prior to retiring, they could separate out what is needed for retirement and what is going to be left for legacy before entering retirement.
Then they could have kept their own portfolio invested appropriately for their age, but simultaneously would have wealth growing in a more aggressive portfolio for the next generation. Yes, we all have a myriad of different goals in retirement. It requires careful and thoughtful planning for those goals so not just one, but ideally, all of them can be achieved.
JOYN’s Work Reframing Retirement
Modern financial planning tactics focus primarily on financial assets but often sidestep efficient tax and legacy planning strategies.
JOYN’s Behavioral Wealth Management model strives to help you figure out your most important priorities, expand your definition of wealth, and connect deeply with your values to make critical decisions about your potential future.
Once we know what’s most important, we pursue retirement income and advanced retirement planning strategies. In doing so, our clients are better positioned to have their short-term spending needs addressed, the retirement they envision, and a legacy for the next generation in the long-term.
ABOUT THE AUTHOR
Jason Eagle has served as a Financial Advisor with JOYN since 2016. He is a Certified Financial Planner (CFP®) and a Retirement Income Certified Professional (RICP®). Deeply passionate about retirement planning, Jason is working on a new JOYN workshop geared at helping people reframe retirement.
Read more about Jason here.
Investment Advisory Services offered through JOYN Advisors, Inc. Registered Investment Advisors. Insurance offered through JOYN Atlanta, Inc. Securities offered through Securian Financial Services, Inc. Member FINRA/SIPC. JOYN Advisors, Inc. and its affiliates are not affiliated with Securian Financial Services, Inc.