A retirement planning program can be developed from two perspectives.
It may be one of the many, and some very comprehensive, computer programs that will take your assumptions and, with perfection, based on the assumptions, calculate your results.
Or it may be one of the many structured training programs being offered by various institutions for people nearing retirement.
With the final option a combination into a personally crafted program which integrates all the tools and advice along the way to get to your customised retirement plan.
Computer based planning programs
A computer based retirement planning program is a useful tool in your overall retirement planner but, even the more intricate versions like Monte Carlo, have a number of limitations;
- Their apparent precision and accuracy is misleading. They are easy to believe because they calculate results so quickly and efficiently. With the resultant conclusions neatly presented into charts and graphs.
- They are only as good as the assumptions. A case of garbage in, garbage out! Truthfully no one really knows what is going to happen tomorrow … let alone next year, or in 5 or 10 years time. The unfortunate complication is that the future is not a neat projection of the past.
Retirement planning training courses
Another option is a retirement planning program course but it also has limited benefits as it is usually conducted too late. It is no use finding out a year or two before you plan to retire that your finances don't quite meet your expectations.
These courses are useful only in that in doing something is better than doing nothing!
These courses should be run for young people so that they start thinking about retirement while they can do something about managing it. Changing its course when there is time to redirect the ship.
The problem here is that in most cases they are too busy living their hectic lives to be concerned about retirement.
Combining programs and courses
The best retirement planning program would include both programs and courses as tools to developing and managing the overall plan.
Recently I have been asking friends two questions;
- "Are you concerned about retiring?"
- "Do you have a retirement plan"?
Sadly most people I speak to answer, "Yes" about being concerned and "No" to having a plan.
Although some do add that they have a financial plan. One which turns out to be a glossy folder with some questionable projections put together by a financial adviser ... not really much use without the complete retirement plan.
My next question regarding their non-existent retirement plan is, "Why not?". The answers are the usual reasons, or excuses, one hears about planning in general:
- "Why plan if you don't know what's going to happen in the future?"
- "I don't know how long I'm going to live"
- "I'm bombarded by so many confusing messages and just don't know what the economic future will bring?"
- "I'm sure everything will be okay?"
- "I've never thought about it!"
I suppose that many of these reasons are true but unfortunately without any plan for retirement you'll be totally unprepared to manage the very challenges and unexpected events that will occur in your life.
Your retirement planning program
You should start from the time you start working. The earlier you start, the better chance you have for success... to have adequate resources to meet your goals and objectives.
So firstly you must define what you want in your retirement. Individuals have vastly different views on the ideal retirement and these require vastly different amounts of funds to support.
- What does retirement mean to me?
- Why do I want to I retire?
- Where would I like to live?
- What is my planned retirement lifestyle?
- What would I like to do?
- Do I have any concerns about my health in retirement?
- How long do we think we'll live?
Depending on the answers to these questions you can then start putting together a financial plan.
- Will we have enough money?
- How much have we got?
- How much do we need to save?
- What specialist information or support do we need?
- Do we need to supplement our income?
- What contingencies do we want to make?
Repeat the planning regularly
Understand that the initial retirement planning program cycle is likely to take a number of iterations. With this phase requiring the input from a financial planner to ensure all the technical and legal issues are understood.
This would be the completion of round one. This exercise should then be repeated every year and amended as circumstances change. Practice will make perfect. With each time you repeat the process you understand it better.
It is advisable to never get too complacent as you never know what tomorrow will bring. Regularly reviewing your comprehensive retirement planning program will ensure that you've done everything possible to make your retirement successful - providing the resources to meet your expectations.