Nonsense in Retirement Planning

by

GeniusPlanning

It’s a fact that many people are scared when they think about their retirement savings. It seems that there is never enough money in our retirement account to reach our retirement goals. These goals are expressed in terms of retirement date and retirement income.

When you meet with a financial advisor, she takes into account your current savings, current income and your retirement goals. She adds a few hypotheses and BINGO! you have to save $X per year to reach your goals. In most cases, a problem arises because you just can t reach your goals because you don t save enough.

You are then offered three solutions:

Save more money before retirement

Postpone your retirement date

Lower your retirement income goal

The problem is that you don t feel like doing any of these. You feel that there could be another solution you don t what you don t how but it s just not there. Three choices. Period. The way retirement planning calculators are built is part of the problem. And I know this because I m a consultant for large financial institutions in the development of such calculators. They are not sophisticated enough.

Well, actually, there is something more out there. There is a fourth way that can allow you to reach your retirement goals without turning the world upside down. This solution allows you to define your goals and priorities in such a way that you will reach a more sensible goal, much closer to what is really important to you.

The most famous rule to set a retirement goal is the 70% rule. What is it exactly? Well, it says that, in order to maintain your lifestyle, your retirement income should be 70% (or around 70%) of what it used to be before retirement. Why less than 100%? Simply because you have expenses related to your job that are going to vanish at retirement and still other expenses that are going to decrease (more expenses decrease rather than increase in these models ). For instance, contributions to social security, unemployment insurance premiums, group insurance premiums, savings for retirement

This rule is good if you have nothing else to rely on. But, believe me, this rule is misleading in most cases. Why? Because it s a rule of thumb that might not be appropriate for you and it focuses on your total budget instead of what really matters. A tiny little mistake on the percentage could mean saving way too much or way too less. Your ACTUAL lifestyle could be annihilated or unduly upscaled which is certainly not your goal. The fundamental problem is then the definition of the word lifestyle .

What a good feeling to be in front of a client and tell her that she s saving too much for her retirement! Believe it or not, this happens to me almost every day. It s also a good feeling to look in the eyes of a client and tell her the truth about (and make her really understand) the real wall that is coming up because she s not saving enough.

The other solution out there is called Genius Planning. You can find it at www.geniusplanning.com. It allows you to redefine your retirement goals and really see the big picture. If you solely focus on your portfolio return which, by the way, is important you are going to miss the boat on your retirement planning.

You can also download a free copy of the first section of the book at www.geniusplanning.com/index.php?id=courses.

I suggest you to at least take a look at this site before throwing in the towel. Regardless of your current financial situation, age and projected time of retirement, there is an optimal solution.

About the author: Dany Provost is a best-selling author, financial planning authority, columnist and regular contributor to several Canadian newspapers and magazines. He has a degree in actuarial mathematics and a graduate degree in taxation. He has developed many financial calculators for financial institutions and the industry in general.

Dany Provost is a best-selling author, financial planning authority, columnist and regular contributor to several Canadian newspapers and magazines. He has a degree in actuarial mathematics and a graduate degree in taxation. He has developed many financial calculators for financial institutions and the industry in general. http://www.geniusplanning.com

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