The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Hope Is Not A Plan


As people approach retirement, their anxiety rises, and this is natural.  After all, retirement is a great unknown.  Most people focus solely on income replacement, but there is so much more to consider.  In fact, that’s not even close to the beginning point.

Start with identifying your risks, keeping in mind that risk is a part of life that everybody must accept.  Bankers have a useful perspective when they evaluate the risk of a loan.  They try to “underwrite” each risk or develop a plan to deal with each risk.

Now, you have public risk, obviously.  What if the government raises taxes (they will) or reduces services after you retire?  Also, how will you deal with increased inflation after retirement?

You have business risk, obviously.  What happens to you if the market tanks collapses after you retire?  What happens to your dividend income?  What happens if there is another credit crisis, like 2008?  What happens if you cannot sell your house?

You have behavioral risk, obviously.  With extra time on your hands, will you start spending wildly?  Will you plan that one last expensive trip that your spouse deserves?  Will you lose your self-identity?  Will you start drinking too much?  Retirement can be difficult on marriages.

You have “chance risk” or the risk of lighting striking you?  If your kid moves back in, can you deal with that, financially and emotionally?  Or, your house burns down?  What happens if you have a major uncovered health emergency?  Especially if you’re travelling at the time.

Lastly, you have the good problem of longevity.  What happens if you don’t die soon?  Can you afford to live long?  How do you know?

Bankers will tell you that hope is not a plan.  You cannot underwrite any of these risks with mere hope!  You must at least be aware of the risks before they happen.

Once you’ve talked through each of these risks with your planner and your spouse, then you can determine how much income you’ll need – not before then!

What!  You don’t know where to begin . . . call your planner . . . today!

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