The Level of Detail Required in a Great Retirement Plan, Ep #145

What will make or break your retirement plan? What makes a plan weak or unrealistic? What needs to be factored into the overall strategy? How do we build a great retirement plan? A retirement plan isn’t just reviewing your investment statements. A far greater level of detail is required to make sure your dream retirement isn’t just a dream—but a reality. So in this episode of Retirement Made Easy, I share a high-level overview of what we do to build a great retirement plan. 

You will want to hear this episode if you are interested in…

  • [2:16] Why it’s time to build/update your retirement plan
  • [7:47] Check out RetirementMadeEasyPodcast.com
  • [10:06] Addressing health insurance in retirement
  • [13:48] Do you want to earmark funds for travel? 
  • [14:27] What are your goals and objectives?
  • [16:22] Factoring inflation into your retirement plan
  • [18:08] Your retirement plan needs to be customized to you
  • [19:56] Do your investments align with your goals?
  • [21:00] Where is your income coming from?
  • [22:14] Making your retirement plan tax-efficient
  • [23:25] Legacy, estate, and beneficiary planning

Health insurance in retirement

Most people will have different health insurance in retirement than when they were working. Many will be on Medicare once they turn 65. That usually means additional costs. Health insurance premiums come out of your paychecks while you’re working. But once you have Medicare, you have to consider those costs on top of your current living expenses. We need to account for that. 

What about long-term care? What are those potential future costs when we need in-home care or assisted living? Will you self-fund long-term care or look at getting a long-term care policy? We need an idea of what those costs will be and plan for them. 

Do you want to earmark funds for travel? 

Many people want to earmark a certain amount of funds per month toward travel, especially if they have children and grandchildren living in a different state. Travel isn’t cheap. You might need to budget over $1,000 a month for that. 

Many people break down the 30 years of retirement into the go-go years, the slow-go years, and the no-go years. The first 10 years of retirement are the years you travel and spend more money. The next 10 years are when you slow down. The last 10 years are spent relaxing and traveling less. So when we build a retirement plan, your travel budget will likely be reduced in your 80s/90s. 

Factoring inflation into your retirement plan

The biggest risk to your 30+ year retirement plan is the cost of living. If a box of Cheerios is $6 today, what will it cost three decades from now? A retiree will pay $14.56 in 30 years! Your plan needs to make assumptions to account for inflation. Because every year, everything you buy will cost more. And you will need to account for more than 1% per year. We like to plan for a 2.5–3% average per year over the next 30 years. 

What are your goals and objectives?

Your retirement plan needs to be customized to you. Other goals will be considered on top of fixed living expenses, healthcare costs, and travel and leisure expenses. 

Do you want to fund your grandchildren’s college education? How will you do that? Maybe you want to put $1,000 in a 529 plan for a certain amount of years. 

Do you want to maintain or increase your giving in retirement? Do you want to continue to donate to your favorite charities? 

We like to segment these costs so people know what they’re spending their money on (and what the plan allows for). Retirement planning isn’t just looking at an investment statement. While the growth of your investments is important, they’re only there to help you accomplish your goals. 

Do your investments align with your goals? 

Many people aren’t aware of how their money is invested in their 401k and how much risk they’re taking. If we expect your portfolio to produce $2,500 a month of income but it’s all invested in gold, you won’t receive an income. 

Where is your income coming from? Can we optimize the timing of your social security benefit? What about a pension? Are you taking a lump sum or choosing the annuity option? What about part-time income? Do you plan on working? If so, for how long? Will it just be “fun” money? 

There are so many things we must consider when it comes to retirement! Listen to the whole episode as I cover most of the factors we consider as we help you build a great retirement plan. 

Resources & People Mentioned

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