According to a study from AARP, 83% of Americans have at least some form or fashion of a plan for death. This is really a surprisingly high number given that somewhere around only 50% of baby boomers even have a simple will…by the way, only 28% of you millennials out there have a will!
However, I pose a very different question…rather than asking what percentage of Americans have a plan for death, why aren’t we asking what percentage of Americans have a plan for living?
A plan for living is called Retirement Planning…a plan for dying is called Estate Planning…combining them both is called Life and Legacy.
When it comes to investments and retirement planning, there seems to be a very polarizing phenomenon that occurs between far too many financial professionals and the average, hard-working family. The financial professional seems to lose all emotional intelligence and exchanges the role of counselor or advocate for the role of “Know-it-all”.
Forgive me for just a moment, but this isn’t helpful! It’s like they are rehearsing for their potential 15-minutes of fame on Bloomberg or CNBC. Newsflash…we don’t care that you can use financial industry lingo. We want a coach, not a pre-Madonna!
So, instead of going straight down the financial rabbit hole of focusing on all the tactics, techniques and tools, let’s take a step back and recalibrate to confirm alignment; through the philosophy of Purpose-Planning-Product.
Define your purpose before building your plan, and by all means, before choosing a financial product (stocks, bonds, mutual funds, annuities, real estate, etc.). Now, with this mindset you will remove a ton of the stress and anxiety around the actual investment choices you make. If you have a rock-solid purpose defined, then that will drive the design of your financial, retirement and legacy plans because it will be all about your needs and dreams, not the advisor, not the market, and certainly not the financial product de jour.
- Beware of the Silent Assassins; Taxes and Inflation!– The three phases of our financial lives are the Accumulation Phase, Spend-down Phase, and Legacy Phase. Think of it as taking on the challenge of climbing Mt Everest. The Accumulation Phase is like the ascent, the Spend-down Phase like the decent, and the stories told about it for years to come is like your Legacy Phase. Two keys to success in all three phases is to have a tax balance approach. Meaning we are paying attention to the tax consequences of our decisions today, and in the future. Where are tax rates today in comparison to where we believe they will be in the future? Additionally, putting the money aside (aka savings) is the beigest hurdle, but once we do set it aside, can we really afford to put it under a rock for the next 5, 10, 30 years? The answer is no, and the longer the time horizon, the more important each percentage rate of growth matters. Don’t forget, use the Purpose – Planning – Product philosophy as your compass.
- Daydream a bit – what will that first day of retirement look like? – Let that inner-child out right now and dream out loud for a bit. Day-one of your ideal retirement will look like what? What time does the alarm go off (or does it at all)? Where are you? What scene do you take in while sipping that first cup of retirement coffee? What will you wear that day; flip flops, boat shoes, ski boots, or are you barefoot? Seriously, dream and write. Write down everything. The color of the house, the temperature, who’s with you, how you feel. OK, this is fun and all, but what’s the purpose of all this warm and fuzzy feeling stuff? A budget. A retirement budget.
Hopefully, we’re already living by our budget now (if not, START today!). It is very difficult (and probably unrealistic) to build a retirement budget out of thin air and expect it to be accurate. Yes, our retirement budget is best built on the foundation of our pre-retirement budget. Some expenses will go away entirely, other expenses my go up (hopefully some fun ones!) and some new expenses that we’ve never had prior may need to be added. Regardless, the budget in retirement is mission critical. It should be aligned with your vision and values and, it becomes your playbook for what is hopefully the most joy-filled years of your life.
- Start talking. – Share these dreams, plans and wishes with those most important to you. For whatever behavioral and emotional reasons, we tend to suppress way too many of our feelings, visions and desires around money. Take a few people out for coffee and share your new approach to building the life and legacy of your dreams. At bare minimum this means your spouse, you executor, your beneficiaries, your pastor, your financial planner and your accountability coach. There are many reasons why this makes good sense. Just to name a few…take your executor to an Executor’s Boot Camp (either through the Foundation for Financial Wellness, or run one on your own) and get them in shape. Additionally, it’s great to begin speaking these wishes into reality; your accountability partner will love to know what’s on your heart and help keep you on track. And one last one, would be the old load bearing truth of “If you want to master something, try teaching it.”. As you begin putting spoken words to your heart-felt “why”, you’ll begin to find holes in your thinking, gaps in your assumptions, misunderstandings from your loved ones. Wouldn’t you rather work on these things now, rather than leaving it up to interpretation once you’re gone?