By Arie Korving
Learn more about Arie on NerdWallet’s Ask an Advisor
I was speaking with a prominent surgeon recently, and the subject of a career “exit plan” came up. He’s not yet 60, but he’s got a stressful job. In addition, changes in the medical field over the past decade have made practicing medicine less attractive to him. His exit plan was a combination of retirement and a second career.
The conversation stayed with me for a few days, and I wrote down some ideas that could help him — or anyone — craft a proper exit plan.
When you retire, your income stops. Even if you begin a second career, your income will probably decline. The money you’ve saved suddenly becomes much more important because it’s the source of much of your retirement income. Avoiding major losses becomes more important than making those savings grow further.
Our surgeon has investment accounts with a number of brokerage firms and is thinking of consolidating them with one provider. We suggested he select the financial advisor he would most trust to provide investment management for his wife if he was no longer there. By thinking of it this way, he can determine whom he sees as most trustworthy.
Consider how your own financial advisor is compensated. There is nothing inherently wrong with working for commissions, but in my experience it can’t help but influence the advisor’s investment recommendations. The “fee-only” advisor has fewer conflicts of interest. In fact, advisors who are compensated based on the assets they manage have an incentive to avoid losses and maximize growth.
There is also the question of qualifications. Some people in the business have broad planning and investment skills and are Certified Financial Planners. Some are experienced portfolio analysts.
The cornerstone of an exit plan is a comprehensive financial plan. It should articulate specific goals. It should make reasonable assumptions about rates of growth, the rate of inflation going forward and your post-retirement income needs. Without it, you’re flying blind. And it’s not something you can draw up on the back of an envelope. The plan may show that you can meet all your goals without changing your lifestyle. It may show that you need to cut back. Or it may show that you need a second career.
The time to begin this process is before you take the plunge. It allows you to look before you leap.
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