By Andy Tilp
Learn more about Andy on NerdWallet’s Ask an Advisor
Not long ago, a couple in their mid-50s came into the office to have our first “get acquainted” meeting. Frank, a billing manager at the local manufacturer, and his wife, Janet, a project manager for a local high-tech firm, have done well over their lives. They have been diligent about saving for retirement, and their last child is almost out of college.
In order to understand why a client has come to visit, one of the first questions I ask is always “tell me about the big picture of your situation.” To this, Frank answered, “I like the people I work with, but I can’t stand my job. Do I have enough money to turn in my notice and retire next month?”
A thorough comprehensive financial plan will answer the specific question. This is a straightforward process where their expenses, income and assets are mapped out into the future. Then various scenarios are put together, and the data is applied to a variety of analysis tests. The results of the test give a mathematical and statistical indication of whether they have the financial wherewithal to allow Frank to retire.
However, the statistical indicator is only part of the question to answer. Before any data is gathered, they need to consider the more important non-data-driven question: “After you retire, then what?”
Frank said he planned to work in the garden, to “finally” clean up his shop and learn to play tennis. When it was pointed out that he will probably have as long in retirement as he did in his working life and he is pressed further about what he’ll do for those next 30+ years, he responds, “Huh, I hadn’t thought about that…. I just want out of my job.”
The issue was further complicated because Janet loved her job and had every intention of working for at least 10 more years.
A comprehensive life plan
Frank’s situation shows there is much more to financial planning than just the nuts-and-bolts, dollars-and-cents aspect of whether there will be enough money. The first step of any financial plan, no matter what your age or stage of life, should be a life plan — that is, thinking about your goals, your dreams and what you want to do in your next stages of life. The important question for Frank to ponder is once the “retirement honeymoon ” has faded, what will he do to get excited and motivated to get up every morning? To help with those ponderings, some questions to consider are:
- Do you want to be part of the wave of gray entrepreneurs? That is, individuals who have longed to have their own business and are now able to apply all they have learned through the career to making their own venture.
- Think back to your young idealist days in college when you wanted to go out and change the world. Do they strike a long forgotten chord that motivates you to pursue those passions again?
- What about an entirely different career? Or maybe something you have always wanted to experience, but life got in the way?
- What about returning to school?
- Can you volunteer to help organizations that are in great need of the expertise you gained in your career?
- Can you volunteer in other ways to help your community?
Those are all questions centered on you. In other cases, you need to make plans together. In the case of Frank and Janet, what are they going to do together while she still working, and after she leaves her work? Janet also needs to answer the question of what will motivate her during retirement.
Once these goals and dreams are mapped out, then the financial nuts and bolts can be applied to answer Frank’s original question. Depending on the answer, some of the timeline and/or the goals may need to be adjusted to fit the reality of their financial situation. But the key is that you are moving forward to next steps of your life with positive motivation and action, rather than with just the desire to get out of a negative situation.