Step 1: My Way/Our Way Retirement Plan Worksheet

Transcription

1 CHAPTER 5 Retirement: A Second Career Choice 111 Step 1: My Way/Our Way Retirement Plan Worksheet Describe your ideal My Way/Our Way lifestyle: Coaching: Sample responses: Two homes or one main home and travel, travel 2 months in winter/summer, visit children, work for fun, go back to college, charitable pursuits, educational pursuits. Describe your ideal My Way/Our Way retirement lifestyle in years 2 to 5: Coaching: How old will the children be? Do you miss practicing medicine? It is okay to go back to work. What is your relationship to happiness? Describe your ideal My Way/Our Way retirement lifestyle in years 5 to 10: Coaching: Is it fun? Are you fulfilled? It is okay to get a second job. It is okay to be a winemaker or coach.

2 Chapter The AMA Physician s Guide to Financial Planning Describe your ideal My Way/Our Way retirement lifestyle in years 10 to 20: Coaching: Am I enjoying being an adult friend to my children? Am I leaving a legacy for my grandchildren built on memories? Describe your ideal My Way/Our Way retirement lifestyle in years 20 to 30: Coaching: Am I happier then I have ever been? Am I content? Am I spiritually fulfilled? Describe your ideal My Way/Our Way retirement lifestyle in years 30 and beyond: Coaching: Am I happy to smell a flower or sip coffee with my life partner and friend? Sample response: I enjoy walking the dog. It is so great to watch the children and grandchildren grow up. I still want to climb Mount St. Helen, hike in the Grand Canyon and ride a camel in the outback I might even invite a grandchild or two. Source: Financial and Investment Management Group, Utopia Funds retirement project, and Paul Sutherland. Printable copy available at

3 CHAPTER 5 Retirement: A Second Career Choice 115 My Way/Our Way Life Retirement Plan Relaxing and Enjoying Life Goals Commitments Priorities What do I want to accomplish in my life? What will I give to accomplish these goals? Balance Intentions Values Now Actions Use of Time Balance What are my commitments to spouse/partner, family, friends, society, work colleagues, and myself? How do I want to be remembered? Work for Income Personal Family/Friends 2 Resources Time Assets & Income Sustainable Financial Plan A financial plan s job is to support and add efficiency to your life plan. Risk Management Elder Care Planning Housing Budgeting Time and Money Tax Planning Estate Planning Legacy to Society Investment Management Legacy to Family What would I do if I knew I would die in one year? What would I do if I knew I would die in 40 years and be healthy, vital, and active until then? Source: Paul Sutherland, Financial and Investment Management Group. A printable copy of this chart is available at put in a device that would keep their heart ticking, would you choose to have it tick on for 20 years or 50? I am comfortable you would choose the 50-year device. To think that a person will die before age 100 is reasonable, but to make a retirement plan around that is irrational; just ask

4 CHAPTER 5 Retirement: A Second Career Choice 117 Step 2: My Way/Our Way Retirement Costs* My Way/Our Way Retirement Budget Annual Estimate Monthly Estimate Home maintenance (estimate 2% of value) $ 12 $ (plus mortgage payment if any) Second home maintenance (estimate 2% of value) $ 12 $ (Plus mortgage payment if any) Travel/vacations $ 12 $ Home insurance $ 12 $ Property taxes $ 12 $ Car payments $ 12 $ Auto expenses $ 12 $ Phone $ 12 $ Electricity/heating $ 12 $ Food/vitamins $ 12 $ Entertainment (movies, plays, eating out) $ 12 $ Education $ 12 $ Subscriptions/computer expenses $ 12 $ Sanity (yoga, counseling, sports, bridge) $ 12 $ Fun (wine, books, lattes) $ 12 $ Personal development $ 12 $ Tithing (religious, usually monthly) $ 12 $ Charitable contributions (budgeted amount) $ 12 $ Insurance/healthcare costs (usually $700 $ 12 $ to $2,500 per person per month) Helping children/grandchildren, gifts $ 12 $ Helping others (usually lump sum gifts) $ 12 $ Total annual/monthly expenses estimated at $ 12 $ Plus 65% of above to estimate expenses $ 12 $ for taxes and margin of error surplus Equals total annual/monthly income estimate $ 12 $ $ 12 $ $ 12 $ *This exercise should be done with your spouse. Most likely you will pay cash for cars in retirement but will need to budget for them based on your needs. For example, if you plan to replace your $36,000 car every 3 years, you will need to put $1,000 aside monthly as your car payment. For example, if your monthly budget comes to $9,900, round it up to $10,000 and add $6,500 for taxes and margin-of-error surplus. Source: Paul Sutherland, Financial and Investment Management Group A printable copy of this worksheet is available at

5 Chapter The AMA Physician s Guide to Financial Planning Step 3: Estimated Income Needed From Portfolio Annual Monthly Estimate of total income needs from last line of Step 2 Less estimated Social Security income* Less income from fixed pension, etc Equals total income needed from investment portfolio $ 12 = $ $ 12 = $ $ 12 = $ $ 12 = $ *If both you and your spouse or partner work and earn over $50,000 each, estimate Social Security annual income for each as follows: Retired at 50 = $ 9,000 Retired at 55 = $10,000 Retired at 60 = $12,000 Retired at 65 = $18,000 If just one spouse or partner worked, estimate Social Security annual income for second spouse at 1 2 of working spouses income for example age 50=$4,500. Retired at 50 = $ 4,500 Retired at 55 = $ 5,000 Retired at 60 = $ 6,000 Retired at 65 = $ 9,000 who understands your needs. Some insurance agents recommend buying life insurance products designed to allow you to take a joint- and 0%- survivor benefit so that you allegedly end up with more income at retirement. I have seen these schemes, which are often called benefit-guaranteed plans or retirement-enhancers, but they are destined to fail. First, because people tend to live a long time. And second, because these insurance agents are using products designed by the same insurance companies that are guaranteeing you the lifetime income on the annuity. So they are working out of the same playbook. The insurance agent, however, is manipulating the information to make the assumption that perhaps you will die at age 83 or 88. If the insurance agent can give you a letter that guarantees the policy to age 110 and the letter comes from a representative of the insurance company, then perhaps you can consider a retirementenhancer program. There are many widows in America who trusted their husbands to make the right choices and found that the retirement-enhancer policy passed away before their husbands did.

6 CHAPTER 5 Retirement: A Second Career Choice 121 but later after I had entered my financial planning career, she told me how Uncle Frank gave her this advice every year. Every year mom would call me and say, I m driving down to Ohio. This will probably be the last time I see your grandma. Grandma lived on those eggs until she was 96. She was full of health and vitality and had a rich life until she died. Uncle Frank constructed a strong portfolio for her that he managed with great forethought. It consisted of high-income stocks, bonds, and other preferred income-oriented stock investments that he managed with skill and expertise. The bottom line is to make sure your portfolio is managed in a way such that your retirement will be comfortable and long-term. It needs to be designed to provide you with a reliable lifetime income. Putting it all together and quantifying your investment needs is the fifth step. You will want to have liquidity of approximately six months and a lump sum to pay off debts, a lump sum for a second home, a lump sum for any boats, dream vacations or similar items, and a lump sum to provide for your lifetime Step 5: Quantify Your Total Investment Needs Generally, you will have paid off all debts before retirement. If not, you will need to anticipate the lump sum needed for these debts and add that to the lump sum you need to retire. It is okay to have debts at retirement; there can actually be advantages to it via tax- savings, but to make your projections work, you must turn debts into lump sums or account for them as part of your budget in Step 1 as monthly payments. Lump sum of 6 months budget/liquidity needs (half of total annual need from Step 2) Lump sum to pay off debts on home, car, etc Lump sum for second home Lump sum for boat, dream vacation, etc Lump sum for retirement income needs* Total liquid investment/income assets needed to retire *Later chapters help you build a plan to achieve this lump sum need. Do not worry about this big number right now; savings, time, and compound returns will get you there. Source: Paul Sutherland, Financial and Investment Management Group. A printable copy of this is available at