Should You Rethink Retirement?

By Jay Eshbach. Photo by Jorge Luis Delgado

Retirement expectations have changed drastically form the last generation. Baby Boomers (birth years from 1946 to 1964) and their now-adult children are living longer, healthier lives. However problems are developing because they are realizing their retirement hopes and dreams are exciting and expensive.

Plus retirement realities have changed drastically.

Longer life expectations produce a need for greater wealth in retirement.
Baby Boomers are findingthemselves in a “sandwich” situation—meeting the needs of aging parents and adult children.
Many Baby Boomers are carrying sizable debt into retirement.
Rapidly rising healthcare cost.
As housing value rise, so do property taxes.

As this short list shows, for some people retirement can have some big disappointments.

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Many people are going to have to realize investment planning (which Mutual Fund or CD to buy) is not the same as integrated financial planning. I, as a Financial Planner, am running into more and more clients that want easy answers to very hard longevity financial planning questions.

I have found that providing sound financial advice to many of my clients is not complicated. However problems occur when I realize, at our first meeting, this is their first meeting with a Financial Planners in 35+ years and they want to retire next month.

Financial Planning done over 30 years to then last for 30 years, in retirement, is not real difficult. However working up a financial plan 30 days that then needs to stretch over the next 30 years, in retirement does, have it difficulties.

Phrases like wealth accumulation strategies and sustainable portfolio withdrawal rates are great discussion topics. However I have found clients do not like to talk about premature asset depletion nor volatility. They want to talk about average rates of return in the positive 10% to 20% range and ignore the volatility of 2001 and 2002 where some returns were in the negative 20% and 30% range.

The Trinity Study* has led many retirement planners to say that a withdrawal rate of 4% is likely to withstand a 30-years payout period, while at 7% withdrawal rate probably won’t. Different planners support different spending rate. I try to tell everyone, that some plan and planning, with a Financial Planners, is better than no plan at all.

*Trinity Study by Philip Cooley, Carl Hubbard, and Daniel Walz, “Retirement Savings: Choosing a withdrawal Rate that is Sustainable,” AAII Journal, Feb. 1998.

ABOUT THE AUTHOR: Jay Eshbach is 62 and has been a Financial Planner for 20 years. He manages over 100,000,000 dollars! His office is about 25 minutes from downtown Houston, Texas. In 2001 Jay was recognized as one of the top four Financial Planners in the United States by Research Magazine. His first book was published in 1996. In 2007 his second book, “Mistakes Retirees Make with Their Finances” was published. He tries to spend one week each month in Ixtapa. He can be reached at eshbach@eshbach.com or www.eshbach.com Securities offered through J.W. Cole Financial, Inc

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