Revisiting your Retirement Plan

Sep 27, 2018 | Nick Dodds


For me labor day marks the end of Summer and time to go back to school.  Now that I have a career I look upon labor day as a time for reflection.  What tasks are in front of me that need my attention?  For most of us I believe that your retirement plan is a key task that needs review.  This task can be overwhelming.

Completing your retirement plan is a task that is best done in stages.  The best time to start is on a Sunday morning with a freshly brewed pot of coffee.  Also have a copy of the Sunday New York Times by your side in case you need to give yourself a break.

First, let’s attempt to figure out how much you spend each year?  I have attached an excel spreadsheet copy of a budget to help you cover all the possible areas where one spends money.  Take a piece of paper and write down where you currently spend your money.  For items where you pay in cash let’s categorize this as your weekly “allowance”.  This way you don’t drive yourself crazy by figuring out what you spend on Lotto Max, Coffees and lunches at the Food Court.  The best place to look at where you spend your money is to look at your credit card statements and your bank statements.  If you live in a house don’t forget to account for maintenance fees even if the expense is not incurred on an annual basis.  A rule of thumb is to establish a rate equal to 1% of the value of your home.  Now add all these items and you have a good idea for how much you will spend during your retirement years.

Second, for all your investments that you have accumulated so far establish an average annual return of no more than 5%.  The reason is that throughout your lifetime your investments will be a balance between equities and fixed income.  

Third, calculate what the after-tax income is from employment and deduct your current expenses.  The surplus should now be looked upon as your annual amount for savings.  The objective is to save as much of this surplus as possible.

At this point you now have the majority of the information required to get the plan into motion.  

Over the years I have helped my clients with their retirement plans.  This process starts when I am presented with their findings.  I will input all the information into our planning software model.  When we get together for our “working” session (I also provide coffee here at my office) this is where we make assumptions about their retirement date, their life expectancy as well as their retirement expenses.  As we modify these assumptions and complete the plan I have found that this exercise has been a welcome relief for my clients.  They now have a good idea of what their retirement budget look like and also have a clear understanding that their investments will more than likely be a balance between equities and fixed income.  In other words they may not have to be so aggressive in terms of investing in equities.

It is never too early to create your financial plan.