Retirement Planning
Defining Retirement
Classic Retirement- The dictionary’s definition of retirement is: The state of having been taken out of use, considered of no further value.
The New Retirement - This is a sampling of what we hear from our clients today about retirement:
- I’d rather wear out than rust out.
- I want to phase out.
- I want to start a new career.
- I want to start a new business.
- I want to enjoy life fully, while continuing to contribute to society.
- I want to leave a legacy for my family or others.
- I want to run my own family foundation to help others in need.
It’s nice to hear what the goals of our clients are, but we need to translate these goals into the answers to “Big Visioning Questions” so that we can increase the probability of a successful outcome. What are the “Big Visioning Questions?” They are tools we use to help clients think about how they will achieve the goals that will assure their future.
We start with a life span question. We wrote about this question in this newsletter in October 2003. The title of the article was “The Value in Setting Goals. ”Basically you draw a line across a piece of paper, Put the letter “B” on the left end of the line and the letter “D” on the right side of the line. “B” stands for birth; “D” stands for death. The line represents your life span. Now place an “X” on where you think you are on that line today. Between the “X” and the “D” is the rest of your life. What do you want to achieve? What do you want that future to look like? While we can all dream of the perfect future, there are aspects of retirement planning that need to be addressed today to increase the probability that we can realize as much of that future as possible.
Creating the Vision for Your Future
Okay, so let’s assume we will live to 100. Let’s assume we have a 50-year future in front of us. To make the visioning and execution task manageable, let’s focus all of our energy on the next three years. My Strategic Coach, Dan Sullivan,1 has perfected many of the questions we now use in our practice so there’s no sense re-inventing the wheel. Dan calls this first question the R-Factor Question. “R” stands for relationship. So ask yourself -- Over the next three years what needs to have happened to you both personally and professionally for you to feel satisfied that you have made progress towards your goals? By answering that question, you have set objectives for the next three years that will allow you to move closer to living the future you want.
The other big questions are what Dan calls the DOS Questions, which stands for Dangers, Opportunities and Strengths:
What are the three biggest Dangers you face?
What are the three biggest Opportunities you have?
What are the three biggest Strengths you have?
Dangers can be:
- Poor Finances
- Poor Health
- Lack of Human Capital
- Environmental
- Family, Friends, Home
- Start a New Career
- Start a New Business
- Improve Your Skills
- Significant Assets
- Adequate Risk Coverage
- Plan for the Future
- Good Family Relations
- Excellent Network of Friends
- Willingness to Embrace Risk
- Excellent Health
- Employment
- Starting a Business
- Taxes
- Legal
- Financial Planning
- Portfolio Management
These are a very complex set of questions with literally dozens of assumptions and variables, most notably including:
- Age
- Life Expectancy
- Income
- Expenses
- Taxes on Distributions
- Inflation
- Type of Assets
- Click on Client Center
- Click on Worksheet
- Download the Expense and Net Worth Worksheets
(1) Dan Sullivan, Strategic Coach
