Journey Into Retirement

As I have done my due diligence in retirement planning it struck me how common the issues and lessons were to what I have been dealing with for the last 30 years as a business analyst. So, for the next couple of blog posts, I thought that I would talk about those lessons. These are perspectives I think that you can use as you move towards retirement.

Lesson #1: To know where you are going, you need to start by knowing where you are. To attain your goals, you need to define them.

Business strategy is fundamentally about finding a way to take you from you current status to a better and more successful place. As an analyst, a great part of my job is to assess the current health of the business and to make recommendations about how to improve it. The beginning point of retirement planning is the same. You need to know where you are at each point as you approach retirement and find a way to manage your current situation to whatever goal you have defined.

So, for example, if one goal is to retire with $1,000,000 in your 401k savings account, you should know where you are at each point before retirement so that you can adjust your savings and investments as you manage towards that goal. I am constantly amazed as I talk to people as close as five years from retirement how few know how their 401k savings are doing, can even annunciate a savings goal for retirement, or have any sense of how to adjust if necessary. The whole process is on autopilot and they believe that somehow it will all work out. Retirement planning is NOT on of those areas where you want to do this.

Some people are very good at defining their financial goals and managing their investments. Others are totally oblivious. I read an interesting article on Yahoo Finance that looked at these various groups of people. About 57% of people have some degree of active management of their finances, while nearly 43% are on some degree of autopilot. See what you think – where are you in this scheme?

http://finance.yahoo.com/news/4-money-mindsets-yours-190001258.html

In a previous blog post (Forecasting Your Retirement Savings, 9/7/13), I talked extensively about savings forecasts that will give you an estimate of where your savings balances will be at retirement. I provided you a tool that would help you make that assessment. This suggests two things: 1) that you keep track of your savings balances on a periodic basis (I suggested monthly tracking), and 2) that you gain some sense of what your final savings goal is. Assess your anticipated expenses in retirement and how much income you will need. Then determine how well those needs will be met with your various income sources including savings. I have found that very few people actually track their balances and most do not have a way of doing a savings forecast.
Both are required for success.

In regard to the second point about understanding your goals, I would direct you to the famous quote by Yogi Berra that “if you don’t know where you’re going, you might not get there.” These are not minor points. If you know where you are and where you need to be, you can gain the information and insights that will allow you to manage to the results you are after. If you know neither, then managing to a goal will be difficult and you may not get there. Welcome to Yogi’s world!