There are many similarities between the financial planning processes used for the majority of retirement plans. Whilst these may be sufficient to comply with prescribed ethical standards, the process followed usually only involves one or two meetings prior to the implementation of the resulting retirement plans.
[Tweet "In my experience, the reason that retirement plans frequently do not achieve their objectives is not the plans themselves, but the planning process that has been followed to prepare them."]
To help explain why I believe that the retirement planning process is essential to retirement success, I refer to the quote by Dwight D. Eisenhower, the former 5-star army general and President of the United States of America.
"In preparing for battle I have always found that plans are useless, but planning is indispensable"
- Dwight D. Eisenhower
It is suggested that quote was referring to the fact that plans prepared years in advance are often incorrect, but if the planning process required a thorough exploration of options and contingencies, then this process is crucial to the selection of appropriate actions as future events unfold.
Key factors for Successful Retirement Plans
We believe Every person CAN have a long, happy and healthy retirement by following a comprehensive retirement planning process for the following 8 reasons:
Lifestyle - What does your lifestyle cost?
Have you noticed that despite your level of income, you are not able to save any money? This may be fine whilst you are working, but when you have retired, it may not work. A retirement plan requires a framework to monitor your spending as well as setting retirement goals. The best time to start a framework is when you are in the transition to retirement phase so that you become accustomed to living within a budget, monitoring what you are spending your money on and understanding what other options you have.
Cash flow - Where are you spending your cash?
Understanding your cash flows is an important part of the retirement planning process. Often simple changes to the way you are spending, accumulating wealth, or paying down debt or income tax, can have a dramatic impact on your cash flows. Understanding how tax laws interact with retirement planning can help you improve your cash flow and avoid taking unnecessary risks close to retirement.
Possibilities - What are your possibilities?
It is very rare for someone to have a clear indication of what their retirement planning goals are and yet this where most retirement plans are commenced. Often goals are frequently not achieved because they are too distant and based on unrealistic assumptions. On the other hand, you may be setting the bar too low without realising what is actually possible.
A better way to approach goal setting is to explore what is possible based on your past, current circumstances and the future and have a process to work through the options you have and weigh up all the possibilities and upsides and downsides.
Transitions - What are the transitions ahead of you?
Retirement goals are more akin to what you would like to happen, whereas retirement transitions are more likely to happen whether you want them to or not. The retirement planning process should look forward into the future and explore what might happen and prepare you for when life does not go as planned.
Your transition to retirement may not be a smooth path and being aware of what might happen will have an impact on what retirement planning strategies are chosen to help you achieve your retirement planning goals.
Happiness - What will make you happy?
A proper understanding of what makes you happy can mean the difference between a middling and fantastic retirement. A retirement planning process should explore all the five keys to happiness and set retirement planning goals to make sure it is about more than just financial security and has a balance between financial health, mental health, social connections, physical health and your sense of purpose.
Future Life Plan - What are your life goals?
A life centered approach to retirement planning takes the time to properly reflect on how you want to live your life. This process helps you find out what financial goals you need to set and where your financial gaps may be in planning for this new life.
Communication with spouse - are you on the same page?
By following a comprehensive retirement planning process, you will be able to explore your own retirement plans for the future and also understand what your partner retirement plans are. When you are both united with a common purpose (or at least with an understanding of each others hopes and dreams for retirement), you will be motivated to stay the course with any changes that you need to make. It will also assist in exploring 'what-if scenarios' to find out how each will react in certain situations.
Alignment of purpose, values and your money.
The ultimate driver of a change in behaviour will be to align your retirement planning goals with your sense of purpose and values. A comprehensive retirement planning process explores your purpose and values and then reviews them as you transition to retirement and move through the different phases of retirement.
A retirement plan is everything and nothing. It is the retirement planning process that is most important. When planning your retirement, don’t start with your goals, make sure you to take the time to explore and consider the life you would like to transition to. This will provide with you with a foundation to then start setting your retirement goals.
A comprehensive retirement planning process will provide you with a better framework to save, invest, reduce debt and income tax, allowing you to enjoy the journey to retirement, whilst also preparing you for the next stage of your life.
We have a 7 Step Retirement Planning process where we look forward into the future, look back into your history and review where you are at now. It is a comprehensive process designed to assist you in developing meaningful and realistic retirement planning goals to allow you to enjoy the journey and to make sure your second 50 is your best 50!
Have you considered all the above the keys to success in your preparation for retirement?
If you would like to find out why you should and how to do it, please contact us via the contact form below to arrange a telephone discussion.
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General Advice Warning: Any advice on this site is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making any decisions.