Ongoing Maintenance

“Three things are necessary for the salvation of man; to know what he ought to believe; to know what he ought to desire; and to know what he ought to do.”

~ Thomas Aquinas

Question: If I’m already retired, do I need to review and adjust my financial plan?

Answer: Your retirement financial plan is a vehicle designed to safely transport you along your journey. Whether it’s a car, bicycle, or financial plan, they all deserve regular maintenance and check-ups.

During March of 2020, our family came to visit for Spring Break. Thanks to Covid, the week happily turned into a great month spent together. It was obvious that we needed more bikes for the gang and found several pre-loved bicycles on the Next-Door App. Now we had bikes for everyone including the youngest grandchild all the way to my husband and myself. It was obvious that we needed professional help to make necessary adjustments so the bikes would meet our needs. Bikes, like financial plans, are not “one-size-fits all.”

Bikes, cars, and financial plans benefit from regular maintenance and check-ups based on general wear and tear. Adjustments can also be made in response to external, unusual, and unexpected occurrences. A perfect example of this is when a sudden drop in the temperature causes tire pressure to drop. It’s rare that the temp drops that much in our area, but these extenuating circumstances dictate that action be taken to keep us safe.

A financial plan requires routine maintenance to create and sustain a plan tailored to your specific needs. Here are three reasons why monitoring your plan in retirement is important.

1. Cash Flow

In many instances, those in retirement position assets to recreate their paycheck. Therefore, reviewing your distribution plan, tax-bracket and portfolio allocation is important. Your “paycheck” will likely be replaced by distributions assets you’ve accumulated over the years, social security, pensions if applicable, and cash reserves. It is important to review your distribution plan each year based on your tax bracket in that given year. This helps identify the specific assets to take distributions from. Finding the right mix of taxable and tax-deferred assets may help ensure you’re being tax-efficient with your distribution plan. It also allows for opportunities to explore whether certain tax strategies make sense, such as capital gain recognition and charitable planning.

2. Budgeting

This concept is the core of all financial plans. Knowing and planning the right budget is essential. Knowing how much you can spend to last throughout retirement years based on longer life-expectancies is the first step in having a successful retirement plan. It’s recommended that you begin with fixed expenses, medical expenses, an emergency fund for unexpected needs, and then outline discretionary cash flow needs. As we like to say, there are wants and needs, and there are times when difficult decisions, and appropriations may need to be made. If one of your bucket list goals is a $10,000 vacation or expense, one way to think offsetting this is to have the discipline to limit day-to-day spending to by $27.40/day or $833.33 per month to offset this withdrawal from your plan.

Consider tracking all your expenses and don’t hesitate to ask for help in running projections with stress tests for market volatility, taxes, inflation, and life expectancies. To get a general idea of your life expectancy and find out about your estimated Social Security benefits, you can go to www.ssa.gov or www.ssa.gov/planners/lifeexpectancy.html.

3. Your legacy

Another reason for check-ins with your advisor during retirement is to discuss how you’ve planned for the legacy you will leave. It’s important to talk about the memory you want to leave, whether it’s for the next generation of your family, friends, or charitable organizations. Topics you may wish to discuss include how much you may want to leave, if you’d like to provide a legacy during your retirement years, after your passing, and how you want to satisfy any philanthropic goals.

Stepping out of the workforce and not having the security of a set paycheck can be a scary feeling. Maintaining a close relationship with your trusted financial team becomes critically important to ensure that the assets you worked so hard to accumulate and provide for the retirement life you’ve always wanted may be a way to reduce the stress. Just like a car or bicycle, a financial plan benefits from ongoing monitoring, adjustments and tune-ups when needed. A relationship with your financial team can provide valuable insights and alert you when your short-term spending puts your long-term financial well-being at risk. Stay focused and plan accordingly.

The opinions expressed are those of the writer as of June 5, 2022, but not necessarily those of Raymond James and Associates, and are subject to change at any time. This material is provided for educational and informational purposes only. Past performance is no guarantee of future results. There is no assurance the trends mentioned will continue or that forecasts discussed will be realized. Economic and market conditions are subject to change. All investments are subject to risk, including loss. Material is provided for informational purposes only and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.