Retirement goal setting – aim at what you require, desire and aspire
By Byron Moore, posted January 16, 2018
Originally published in the News Star and the Shreveport Times on Sunday, January 14, 2018.
Question: My wife and I are setting some goals with respect to our retirement and we have a question. Should we be pessimistic or optimistic about how things will go, both now and in retirement? I’ve run different scenarios and things can really turn out wildly different depending on what assumptions you use.
Answer: One of the great unspoken sins of my profession (financial planning) is allowing people to think we can forecast the future with any greater precision than a palm reader.
What we should assist the public in doing is creating various scenarios that test one financial strategy against another, not to forecast the future outcome but to evaluate the efficacy of one course of action versus another.
The majority of workers today are relying heavily on a 401K style retirement plan for their retirement security. These “defined contribution” plans take worker contributions, invest them in some combination of securities and wait on the future to determine what the worker will have to retire on.
The results can vary widely depending on the amount a worker contributes and the investment returns experienced in the plan during his working (and contributing) years.
Because the future is so unknowable, I suggest you begin to identify the kind of lifestyle you want to live in retirement and divide it into the following categories:
What do I require? This is the ground floor of your lifestyle needs. You know you’ll need a place to live, food to eat, clothing, transportation and medical care. If you own a house, remember to include not only the house note (if you will still have one in retirement) but also the various utility, maintenance and upkeep costs associated with home ownership.
Try to keep this category as barebones as possible, but don’t be ridiculous.
What do I desire? Into this category fall those things that make life (and retirement) worth living. This may be a larger home or even a second home. It would include any travel or vacations you wish to include in your retirement lifestyle.
If you plan on being a lavish, gift-giving grandparent, put that here as well. Just make sure you know these are items you could survive without, even though you may not wish to.
To what do I aspire? Here’s where you do a bit of dreaming. These are your reach goals. Everything has to fall into place for this to occur, and you realize these may not ever happen.
This category might include funding your grandchildren’s college education, making a significant financial contribution to a cause or institution in which you believe deeply, taking a trip around the world, serving as a missionary overseas…
Aspiration goals sound a little crazy when you say them out loud, so you probably don’t too often. In fact, you may be hesitant to even make any. But I suggest you do. They can serve as a beacon of possibility when life seems to be mundane.
You can’t control the future or see how thing are going to turn out 20 years from now.
But you can prepare for a variety of outcomes by setting goals on differing levels.
With those goals in hand, you can better know what to do now to prepare for the future you require, the future you desire and even the future to which you aspire.
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