Oh, the vision we have for retirement!
Whatever vision we may have about retirement, confidence is certainly a part of it. Whether we have a vision of traveling to romantic cities on multiple continents or a plan to work in some fashion other than our current employment, almost everyone includes a solid footing. No one I know envisions a retirement footing like that of Wiley Coyote after he went beyond the cliff chasing the Road Runner. We know that you cannot plant your feet solidly in mid-air! Unfortunately, the first certainty about retirement is to plan for surprises!
“What’s the biggest surprise about retirement?”1
Glenn Ruffenach mentioned expenses, pace, and work as the biggest surprises he encountered in the first year outside the his old office at The Wall Street Journal. Having spent 33 years writing for possibly the premiere financial periodical in the United States, one would think he knew retirement planning well. However, he simply did not expect to be hit with the number of bills he and his wife encountered. Like many others, they entered retirement at a gallop. While they wanted to see and do as much as possible, they found the pace too taxing and the cost too draining. Expect surprises!
“‘Sure’ Things about Saving for Retirement That Aren’t”2
Nevin Adams is a regular contributor to NAPA-net, an online information and advisory periodical for Plan Advisors. He recently wrote about four things that are not sure in retirement. While we may expect our tax rate will be lower after we stop working full-time, that is far from a given. Target Date Funds have become a popular vehicle for retirement saving. Many assume these funds are all pretty much alike, but that is a false assumption! The third uncertainty of retirement is the widely held assumption that you will “only” need about 70% of your pre-retirement income. He concludes with this assumption that is absolutely false, “If you can’t afford to retire, you can just keep working.” Retirement is NOT a sure thing!
Political Influences Could Cause Retirement to Change3
In early April of 2016, the U. S. Department of Labor proposed a rule that requires all who call themselves financial advisors handling retirement accounts to place the client’s interest first. The rule stems from the concept that “fiduciaries” were required to place a client’s interest first, while advisors who were compensated via commissions focused upon recommending high fee investments. While such generalizations have some basis in fact, they are far from universally applicable. This rule has been and continues to be a political hot potato. Another example of the impact of politics upon retirement is the 401(k) plan. Some in Congress would like to strengthen this retirement vehicle by making it more difficult for people to withdraw funds and build toward retirement, but political consensus always seems difficult. Politics always possesses the power to make a straight road become curvy.
So What Is the Answer?
The answer is to plan and act as wisely as possible. Learn from the mistakes about which others have written and are writing. Allow your plans to be flexible. Never think that one solution fits all or that your current plan will not need alteration. While we all would enjoy a path of solid footing, there is something exhilarating about uncertainty!
1 Glenn Ruffenach. The Wall Street Journal. October 9, 2016.
2 Nevin E. Adams, JD. NAPA-Net.org. November 15, 2016.
3 Ben Steverman. Think Advisor. November 14, 2016.