7 Ways to Build the Best Retirement Plan

Key Points – 7 Ways to Build the Best Retirement Plan

What Is Financial Independence?
Outlining What’s Important to You and Your Spouse
You Can’t Just Take a Set-It-and-Forget-It Approach If You Want to Build the Best Retirement Plan
Working with a Team of Professionals Is Critical
You Don’t Know What You Don’t Know
9 Minutes to Read | 23 Minutes to Watch

How to Go About Building the Best Retirement Plan

Is retirement constantly on your mind? Rather than getting stressed about when you’re going to retire or if you’ll have enough to get through retirement, you need to plan for it. Dean Barber and Bud Kasper are going to help us highlight why planning for retirement is so important by sharing seven ways to build the best retirement plan. We want you to have a plan that’s designed around your goals and desired lifestyle in retirement.

7 Ways to Build the Best Retirement Plan

1. Striving for Financial Independence

We might be a couple of weeks removed from the Fourth of July, but independence is always on our minds at Modern Wealth Management. It’s our goal to help people achieve and maintain financial independence. Most people don’t realize it, but they start chasing financial independence long before they actually thinking about building the best retirement plan.

It can be challenging for people in their 20s, 30s, and even their 40s to understand retirement entails because it’s so far out into the future. But rather than thinking about retirement, think about trying to attain financial independence.

“When I say financial independence, it means that I no longer depend on work to drive income. I want to wake up and do the things I want to do because it’s what I want to do and it doesn’t matter if I make money while doing it. If I happen to make some money while doing it, great. If not, that’s OK too.” – Dean Barber

Getting into a Retirement State of Mind

To build the best retirement plan, you also need to be psychologically prepared for retirement. It’s important to realize that there’s a big transition that takes place when you retire. You go from working for your money to your money working for you. That’s something you need to plan for at least five to 10 years prior to retirement. When you successfully make that transition, you’ve reached the pinnacle of financial independence.

Why Is Becoming Financially Independent So Difficult?

Let’s focus on what the journey to financial independence looks like. It’s a longer road that you might realize. Were there times during your childhood when you told your parents that you were going to move out and live on your own just because they wouldn’t let you keep playing with one of your toys? Well, that obviously wasn’t going to work out for you. You were dependent on your parents for food, clothes, a place to live—the list goes on.

Let’s fast forward a few years to graduating from high school. You’re finally moving out of your parents’ house and will be all on your own. But who is paying for you to go to college? Most likely your parents or maybe your grandparents, right? And there are probably a few other things you’re still depending on your parents for as well even though you’re not living with them. The journey to financial independence is still in its early stages.

There’s a lot of growing up that can happen when you’re in college, but are you financially independent when you graduate? Nope, not yet. Even if you’re not moving back in with your parents and can afford to live on your own, you need income from the job you’re starting to pay for housing, food, bills, etc.

The Circle of Life

Fast forward a few years and you’re now engaged, then married, and eventually starting a family of your own. Now your family is dependent on your income as well (or if you’re a stay-at-home parent, your children are still dependent on your care and your spouse’s income).

But as your children begin striving for financial independence (even if they don’t realize that they are), you can get closer to attaining it if you are diligently saving and planning for what you want your retirement to look like. That’s key to building the best retirement plan.

2. Communicating What’s Important to You Leads to Your Best Retirement Plan

Let’s dig into planning for what you want your retirement to look like. It’s all about determining what’s important to you. Again, once you’re financially independent, you’re doing the things that you want to do for the reasons that you want to do them and not because you need a paycheck.

And if you’re married, building the best retirement plan isn’t just about your retirement. What’s important to your spouse? When you and your spouse step into retirement, you’ll likely be spending a lot more time together. What are you going to do with it? There needs to be ongoing discussion about that as you build your best retirement plan and as you go through retirement.

“We take people through a prioritization exercise early on in the relationship with a new or prospective client. Not only do we think it’s important to communicate what’s important to you to your spouse and vice versa, but you also need to know. Your plan should be tailored to what’s important in your life.” – Dean Barber

Gaining Clarity, Confidence, and Control in Retirement

If you’re not wanting to retire quite yet because you enjoy your job, that’s perfectly fine, too. But if that’s what you’re wanting to do, you still need to build a retirement plan that works best for you and your partner. There’s eventually going to be a point where you don’t want to work anymore. And keep in mind that you don’t need to wait until retirement to start doing what’s important to you if the best retirement plan that you’ve built has given you the clarity to do so. That’s what financial independence is all about.

So, if you want to go on a trip, spend more time with your grandchildren, etc., don’t wait until retirement if your plan is giving you permission to do those things that are important to you. And if your employer isn’t OK with that, remember that you have leverage here. You can retire whenever you want once you’re financially independent.

3. Front-loading Your Retirement Plan

When you’re building your best financial plan, keep in mind that your financial wealth isn’t the only wealth you need to be focusing on. You also have social wealth, health wealth, and time wealth. Those are all just as important, if not more important, as your financial wealth.

Part of why we emphasize building your best retirement plan at least five to 10 years before retirement is because of your health wealth and time wealth. Those two can oftentimes be intertwined. Simply put, we don’t know how much time we have on this earth. Life is short, hence why time wealth is so valuable.

Your Health Is Your Wealth

One reason why life can be so short is because of bad health. Dean and Bud have unfortunately witnessed several instances in which a client will tell them that they’re in great health as they’re going into retirement or early on in retirement only for tragedy to strike. This is why a big component of building the best retirement plan involves front-loading your spending in retirement.

“If you’re going to do some things that you’ve really wanted to do for your whole life, plan for it and do them early in your retirement years.” – Bud Kasper

When our advisors are building your best retirement plan, they understand that a person or couple usually has about 15 years of good health to enjoy in retirement. Let’s make the most of the years that you’ll be in good health by spending more during those years. Enjoy that precious feeling of financial independence by front-loading your spending in retirement as you’re building your best retirement plan.

4. Seeking Out a CERTIFIED FINANCIAL PLANNER™ Professional

Front-loading your spending as a part of your best retirement plan might sound like an easy thing to do. However, there’s more than meets the eye with this. Building a forward-looking and comprehensive retirement plan to the best of your abilities is an art form.

It starts by picking a CFP® Professional who upholds their fiduciary obligation to put their clients’ needs before their own. They’re committed to helping people mitigate financial risk so they can achieve a high probability of success as they navigate retirement.

Picking the best CFP® Professional is just part of the art form with building your retirement plan. You can start to see everything come together in the financial planning process when your CFP® professional works alongside a CPA and other professionals to the build the best retirement plan for you. At Modern Wealth, we’re fortunate to have tax, estate, investment, insurance, and risk management specialists that work with our advisors to ensure that your financial needs, wants, and wishes are being met.

“The ultra-high net worth individuals expect that their investment professional, CFP® Professional, CPA, estate planning attorney, and risk management professional will meet in the same room as them at least twice a year to review what’s important to them and coordinate together to make it a reality. But the millionaire next door not only doesn’t expect that. They don’t know it exists.” – Dean Barber

5. Adjusting Your Plan as Things Change

When you’re building your retirement plan, you can’t just build it and then not look at it again for the rest of your retirement. So many things in your life will change in retirement—the markets, legislation, your goals, the list goes on and on here as well. This is also why the best retirement plans are forward-looking.

Take tax law, for example. Current tax rates are extremely low, but the clock is ticking on that. We know that tax rates are scheduled to revert to the higher rates of 2017 when the Tax Cuts and Jobs Act sunsets in 2026. Keeping that in mind, we’ve been looking at different tax planning strategies—such as Roth conversions—so that our clients are paying tax now while rates are lower rather than when they’re higher after 2025.

This shows how critical tax planning is as you’re finding the best way to build your retirement plan. Tax planning focuses on paying as little tax as possible over your lifetime, not just in one year. To have the best retirement plan, you need to meet with your CFP® professional and CPA together once or preferably twice a year to review your plan for opportunities like tax planning strategies.

6. Rebalancing Is Critical

Next up on our list of seven ways to build the best retirement plan is rebalancing. Dean and Bud just looked at what a midyear rebalance might look like on America’s Wealth Management Show. Before we get into rebalancing, you need to first identify your proper asset allocation. How much should you have in stocks, bonds, cash, etc.? Those asset classes are going to perform differently over time, hence why it’s important to look into rebalancing so that your portfolio won’t get too out of sorts.

Let’s go through a quick rebalancing example. On January 1, let’s say you had a 60-40 portfolio—meaning that you had a balance of 60% in equities and 40% in fixed income. Well, now that we’re just past the midpoint of the year, your portfolio isn’t going to be at 60-40 anymore. It’s probably closer to 65-35 or 70-30.

“When I think about rebalancing, I think about adjusting the portfolio to take on more risk or reduce risk based on your plan and tolerance.” – Dean Barber

Investments Are the Engine That Make Your Plan Go

The only way to know your proper asset allocation is by having a financial plan. Remember that your investments are simply the engine that makes your plan run. What do they need to do for you so that you can accomplish your goals? Make sure you’re looking at rebalancing a few times a year so that you continue to have the best retirement plan for you.

“There are a lot of variables that need to be understood. If you’re working with someone who is just selling you investments, you have a void that you need to fill.” – Bud Kasper

7. Think of Retirement as a Long Road Trip

We’re going to bring this full circle for our seventh way to build the best retirement plan. We explained earlier that it’s a long journey to finally reach financial independence. Well, retirement is also like a long road trip.

As we mentioned earlier, you need to adjust your plan as things change. If you really think about it, your directions/plans are going to change during a long road trip as well. When you enter your destination for a long road trip, your GPS will give you an estimated time of arrival. However, it’s not likely that will be the time you arrive. As traffic flow changes and as you make stops, your ETA will change.

Can you start to see how your retirement is like a long road trip with some of the examples we gave earlier of changes that will happen in retirement? A sudden illness or long-term care stay can serve as an unexpected detour and change your destination.

“Retirement is a long trip. You need to understand that there are going to be forks in the road. You’ll need to know how to maneuver around those for yourself, your family, and family’s future.” – Bud Kasper

Legacy Planning

When you’re building the best retirement, you really can have a couple of end destinations. The first one is obviously the end of your life. If you successfully build the best retirement plan, you won’t run out of money as you’re accomplishing your retirement goals. But maybe leaving a legacy as well. Most people do.

If you’re passionate about leaving money behind to your loved ones or different charities, make sure you’re planning accordingly and that everyone is aware of what you’ll be giving them. Hopefully, you’ll live a long and healthy life, but it’s critical to plan for the unexpected.

If you and/or your spouse starts to experience some memory loss or has an unexpected health problem, having a retirement plan that best suits you and your spouse’s specific needs will alleviate financial stress from the whole family rather than add to the grieving process. By building a customized retirement plan, you can help ensure that your loved will be in good hands long after you’re gone.

Let’s Get Started on Building the Best Retirement Plan for You

Oftentimes, the hardest part of building the best retirement plan is figuring out where to start. Well, let’s go back to our fourth point. Finding the right CFP® Professional is critical to building the best retirement plan. Our CFP® Professionals are ready to find out the things that are important to you and figure out your path to financial independence. You might even be there and not even know it!

As Dean likes to say, you don’t know what you don’t know. Building the best retirement plan for you and your partner is very complex and requires a team of professionals that’s working for you. We have that team of professionals and Modern Wealth and are ready to answer your questions about how to go about building your best retirement plan.

Even if you don’t have many questions ready now and simply want to know where you’re at, get a conversation started with one of our CFP® Professionals. You can schedule a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals by clicking here. We can meet with you in person, by phone, or virtually depending on what works best for you.

Building Your Best Retirement Plan with Our Financial Planning Tool

As you’re thinking about what CFP® Professional you want to work with, we also encourage you to test out our financial planning tool. With our tool, you can start building a comprehensive, forward-looking plan, goals-based plan from the comfort of your own home. To start building your best retirement plan at no cost or obligation, click the “Start Planning” button below.

START PLANNING

And if you have any questions about our tool, don’t hesitate to reach out to us. We can go through those questions and screen share with you while using our tool. We can’t wait to get started on building your best retirement plan.

7 Ways to Build the Best Retirement Plan | Watch Guide

00:00 – Introduction
01:38 – 1. Striving for Financial Independence
05:49 – 2. Communicating What’s Important to You
09:41 – 3. Front-Loading Your Retirement Plans
11:01 – 4. Seeking out a CFP® Professional
14:00 – 5. Adjusting Your Plan as Things Change
17:27 – 6. Rebalancing Your Portfolio
19:43 – 7. Think of Retirement as a Long Road Trip
20:35 – What We Learned Today

Resources Mentioned in the Episode

Articles

Past Shows

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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.