#27 Screw Retirement Goals, Here's a Better Way [Podcast]

Setting retirement goals can be a big waste of time.

In my 23 years of advising individuals and families, I've rarely found someone that had clear retirement goals.  Guess what?  They were still able to live a great life and retire comfortably.

In this episode I'll explore the problems with setting retirement goals and offer a better way to plan.

Retirement Tip of the Week

How to Prepare for the Unthinkable: a House Fire

Recently someone close to me went out for a movie and returned to find their home burnt to the ground. They lost everything, including their dog.  In a few short hours they had no home, no clothes, no furniture, no family photos, no records, no nothing.

This is the type of thing that can never happen to us, right? It's the type of thing that happens to "other" people. Think again.

Here are some simple tips to help you prepare for this unthinkable crisis.

Complete a Video Inventory

  • Work room to room

  • Narrate, describing items (brands, models, amounts)

  • Specifically document valuables (jewelry and artwork)

  • Don't forget the garage

  • Keep copy of video outside the home

  • Update annually

Back Up Important Documents

  • Tax returns

  • Photos

  • Contracts

  • Estate plan

  • Financial information

  • Keep back up offsite (loved one's safe or safe deposit box)

  • Update Annually

Understand Your Home Fire Coverage

  • Full replacement cost coverage

  • Market value coverage

  • Personal property coverage

  • Valuables rider for expensive items such as jewelry, etc.

After the Fire

  • Contact insurance agent immediately

  • Ask for advance on your claim to cover short-term costs

  • Secure your property

  • File claim right away

  • Keep track of all living expenses (with receipts)

  • Don't stop paying your homeowners insurance premium

  • Don't close your claim out too fast

  • Get grief counseling

Feature Presentation: Screw Retirement Goals, Here's a Better Way

Retirement Goals. In my experience, few people set them and even fewer stick to them over the long-term. Retirement goals are something we are told we need to have so we can plan for them. Traditional planning forces them upon you and then shows you all the saving and sacrificing you'll have to do to achieve them.   No wonder nobody plans.

Recently a mentor of mine, Michael Hyatt, wrote a great blog about the problem with the traditional concept of retirement (Why Retirement is a Dirty Word). I agree with him.

If retirement and retirement goals are outdated concepts then how do you plan for the future?

In this episode, I'll explore some of the problems with setting retirement goals and show you a more productive way to plan for the the future.

I discuss:

  • The problem with traditional retirement goal setting

  • Why we don't stick with retirement goals

  • How you might be limiting your future

  • How you might be limiting your current life

  • The importance of priorities

  • How to turn your financial priorities into actions

  • How to negotiate with yourself

  • The six areas you need to set priorities for

  • How to live a more balanced life

QUESTION:  Do you have retirement goals?

  • If so, are they meaningful?

  • If not, why?

Let me know via Twitter Tweet to @roger_whitney

Get the Transcript Here

The Retirement Answer Man Episode #27

Hi. This is Lou Mongello, host of the WDW Radio Podcast – your Walt Disney World information station. You are listening to Plan Well, Invest Wisely – the podcast dedicated to helping you make smarter financial decisions.

Welcome! This is Roger Whitney. I am the Retirement Answer Man and I’ll tell you, I sure wish that I had that great announcer voice such as Lou Mongello. Lou just has an amazing voice. He has a podcast and a whole multimedia platform based around his love of Walt Disney World.

I did an interview with him some time ago about how to go to Disney and about the book that he wrote about saving money when you go to Disney. But anyway, I sure wish I had his voice, and he is one of the nicest men. I’m in a mastermind with Lou and he talks like that all the time. That is his normal voice. So, could you imagine him being your father or your husband?

Anyway, we are here to help you plan well and invest wisely for your retirement. I’m excited today. I’m a little jazzed up and I’m going to tell you why. I got an email recently from a client and I want to read you just a little part of it.

It says:

Hello Roger,

Retirement is wonderful! Two full weeks, and I’m not bored yet!

Thanks for all your help and input in making this happen.

How cool is that? It’s nice to get emails like that. I mean, I’ve worked with these people and talked to them for a number of years, and this is really rough transition. When you’re making a life transition from your full-time day job to what happens after that, that’s stressful because you’re worried about blind spots that you may not be aware of – financial dangers or things that you haven’t considered and you can never consider everything. You really can’t. That’s why it’s so important to have processes in place so you can plan well, plan to the best of your ability, and be agile enough so, when things pop up – be they good or bad – you’re in a position to be able to react prudently to them so you can mitigate whatever the issues are. So, just a nice email; I was really happy to receive that so I’m smiling right now.

Anyway, today, we have two important topics. In our retirement tip of the week, we’re going to talk a little bit about how to prepare for the unexpected.

Recently, we had a very unexpected – obviously, they’re always unexpected – house fire happen to someone that we truly care about and it was extremely traumatic and I’ll tell you a little bit about it. but more I want to focus on things that you can do to prepare for these unexpected events so, in the unfortunate circumstance that it happens, you can handle it as best that you can.

And then, in our main topic today, I want to talk about – I’m just going to lay it right out there – why you need to just screw retirement goals, don’t set retirement goals, what some of the problems are with retirement goals, and how they don’t seem to resonate with a lot of people – even though we’re all told that we need to have them. And then, give you or offer up what I think might be a better way to set financial priorities in your life that will be more actionable and more meaningful for you.

So, gee, we haven’t set expectations too high today.

You can find me at rogerwhitney.com – that is the home of The Retirement Answer Man and that is also the home of The Retirement Answer Library which is a platform of checklists and worksheets that I use in my practice that you can access and download for free to make smarter financial decisions in your life. And, to access those, you just need to go to rogerwhitney.com, click on the right-hand side, and enter your first name and email, and you’ll be able to set up your own username and password to access The Retirement Answer Library.

Now, access is totally free. The reason I have it set up as a membership is so I have a more robust platform for a lot of the things I’m getting prepared to put in there so you’ll always have free access to that. So, just go to rogerwhitney.com and register if you want access to worksheets and checklists.

All right. Well, before we get started, we’re going to do the all-important disclosure, and that disclosure is only you know your entire financial situation so take this podcast and my blog and really anything you read on the internet as helpful hints and education because we don’t know you. We don’t know what’s going on in your life and that means everything when you’re dealing with financial matters.

So, before you make any decisions on anything that you read or hear on the internet, make sure you consult your legal advisor or your tax advisor or your financial consultant – the people that know you best and that are your SWAT team for helping you manage your financial life. That’s just not a great legal disclosure. That is a sound principle of planning well in your life.

Okay. So, let’s get to the retirement tip of the week.

Okay. So, I want you to imagine something for a second and I want you to imagine that you and your spouse find yourself with a free night and you decide that you want to go out to have a nice dinner and maybe go see a movie. So, you get home early, you take care of whatever you need to take care of around the house, and then you get into your car and you go to the local restaurant – whatever your favorite restaurant is – and you have a nice meal. You’re actually able to sit there and talk and unwind from the week of week and kids or whatever else is going on in your life.

And then, after dinner, you go see a movie – a comedy that you wanted to see for some time. It’s always great as a couple to spend some time together just talking about being present with each other because there’s so many things pulling us apart in our lives. So, those special times when you have that moment where you can go out to eat and relax a little bit together and enjoy each other’s company.

Now, imagine, as you’re driving home and you pull on to your block, you see flashing lights and you smell smoke and you drive up to fire engines, police cars, and there’s a burning blaze and the house is literally almost burnt to the ground and you look and it’s your house.

How devastating would that be? You’ve lost all of your stuff – your furniture, all of your electronics, your man cave, your big screen TV. You lost all your clothes, all your family photos, all your financial records. You even lost the family dog. How horrible would that be? And you pull up to this chaos. Your mind can’t even process what’s going on. You get out and you just… Can I save anything?

Imagine coming home and having everything that you’ve owned and you’ve worked for and you’ve put your love into. What do you do next? Who do you turn to?

Now, that’s a devastating scenario. Recently, we had somebody that we care about greatly have her parents go through that – or that was very close to what the scenario was. That particular individual had to go and help her family piece together, “What do they do next? Where do they go? Where do they stay that night? What are they going to wear the next day?” and process all of the grieving that goes through losing all of your belongings.

They say that, you know, having your home robbed – one of my partners had his home burglared – is that the word? Twice, and this was ten, fifteen years ago. But he’s talked to me about the feeling – the invasion that you have and the lack of security after going through something like that. So, I can imagine having this type of scenario of having a devastating house fire be even more of a violation of that sanctity of your home and security that you’ve built up.

What do you do to protect yourself? Or what do you do if this happens to you?

Now, I don’t have home safety tips for you. But I want to walk through some things that you can do from a financial perspective to help you if – God forbid – you end up having to go through this type of scenario. I’ll focus on the financial perspective a little bit more because that’s my area and I wouldn’t want to profess to talk about having walked through this and what you could do on the safety side.

First off, one of the most important things you can do – and it’s something that we never do and, bluntly, I have not done – is complete a video inventory of your home because what will happen is, as you file that claim, you’re going to have to demonstrate or prove what personal property you have so you can be reimbursed for so you can start to rebuild this castle or this home wherever it might be.

Video is one of the easiest – and, nowadays, one of the cheapest ways – to do it. What I would suggest is that you begin your home inventory starting in one room and working through that room and going to the next room and then the next room. While you’re filming that video, narrate everything that you see.

Describe the items that you see. If you’re in your closet, describe all of your suits and how many you have, what the brands are, how old they are. Describe the type of TV that you have and the type of furniture and if you happen to know when you bought it. The more details you can give on this commentary as you walk through and pan through all of your items in your home, the more substantiation you’re going to have if this unthinkable thing happens.

You want to specifically document valuables such as jewelry and artwork and things that might be “irreplaceable” – antiques – so you can have a very detailed record of what those were. And, nowadays, with digital recorders, it can all be saved on something no bigger than a quarter, right?

And then, once you do that, you want to keep that – guess what – not in the house! You want to keep that in a safety deposit box or at your office – some place other than your home. And then, if you’re able, depending on how much of a consumer you are, you want to update that probably annually, if not every two years. That way, as you expand or update things, you can always have a reasonably current record of all of your personal property.

By doing that video inventory, and I think that’s a lot easier than filling out a worksheet or writing down things or taking photos because you can actually create the running commentary of all these items.

The second thing that you’re going to want to do is you’re going to want to back up your important documents. Now, we had an episode – I think Episode #25 – where we talked about document organization and I bared my soul a little bit about all the paper documents I have everywhere and I’m in the process of scanning and digitizing all of those things.

But, imagine, if your home burned down, all of your financial records would be lost – all of your tax returns, your financial information, your estate plan, contracts that you may have – all of those things would be burnt to a crisp. So, it makes sense to back up the essential documents and that’s what I’m doing. I’m going through that process right now and my plan is to scan these and keep digital files of all of these things on my computer.

And then, as part of that – and this goes with your family photos which might be the most devastating thing to lose – all those family memories of photos and videos and captured moments of your children and you or your spouse’s lives, that might be the most devastating thing that you lose in a fire. All of the other things can be replaced for the most part. It’s devastating, but losing my son’s first steps or my daughter’s field day where she’s jumping up in the bag race – that’s one we have and that’s adorable. Losing those type of memories forever would be just as devastating.

So, when you digitize your tax returns and your contracts and your estate plan and all those important documents, then you want to back those up and there are a lot of backup resources. One of the easiest things you can do is just go by a portable hard drive. Just go to Best Buy or the Apple store some place and get a portable hard drive that costs maybe $100 for a terabyte which is a large amount of storage. Systematically, back up all of your photos and all of these financial documents onto that remote hard drive and then go keep that in an off-side location that could be in a safety deposit box, at your in-laws house. And then annually, go and re-backup everything on that same drive so you capture all of those really important documents and photos in the event that this unthinkable thing happens.

One thing that you can do on the front end – and this is hard to do – is understand your home coverage, your home insurance coverage. That’s probably one of the most boring things to do, to look at your homeowner’s insurance policy. That’s actually above looking at your auto insurance policy. But, in situations like this, it could be extremely important.

When you’re talking about fire coverage – and I’ll have to bring an insurance expert on to talk about home and auto insurance at some point – but when you’re talking about home fire coverage, there are two basic types of coverage for the dwelling or the building.

The first is full replacement cost coverage and that’s typically the most expensive which is basically saying we will rebuild it to exactly what it was regardless of how much it costs to do it. we’re going to replace it.

And then, you have the cheaper version which is called market value coverage which just looks at the appraised market value and that’s the amount that will be spent – assuming it’s below the limits of the insurance – to replace your home. That’s generally less expensive insurance, but it doesn’t give you that full replacement guarantee.

And then, outside of your dwelling coverage, you want to look at your personal property coverage. How much personal property would be covered by your homeowner’s insurance in a situation like this when your home has burned down? Typically, it runs about 50 percent of the house coverage or the dwelling coverage. So, if you have $300,000 in coverage for your dwelling, more than likely, on average, you’re going to have about $150,000 covered for your personal property. And, the better you can document that, the more accurate and the more you’ll be able to be compensated for the loss of all of your things.

And then, separate to that, you want to make sure, if you have expensive jewelry, antiques, anything that’s out of the ordinary in terms of its rarity or its value, that you have a specific writer for those items because, if they’re extremely valuable, they may not be covered under the normal personal property coverage. So, if you have a lot of valuables in your house – things that are rare in nature – you want to make sure that you have those appraised and you have a special writer just to compensate your for those type of items in the event you have a catastrophic event like a house fire.

If you have a fire hit your house and you are this couple driving home to this devastating event, what do you do after the fire?

Some quick tips here would be:

Contact your insurance agent immediately that night. A good insurance agent would be out there, immediately helping guide you through this process.

Contact the Red Cross because they have a lot of assistance for people dealing with these type of disasters.

Ask your insurance agent for an advance on your claim to cover short-term cost because you’re going to need clothes, you’re going to need toiletries, you’re going to need a place to live, and a lot of times, they can give you a short-term advance so you can have money in your pocket to deal with all the expenses that you’re going to have.

You’re going to want to make sure, once the fire department tells you it’s safe, to go secure your property. Mitigate whatever damage you can in terms of theft and things like that once the fire department says that it’s safe. That’s something the insurance company may require of you so you want to make sure that you secure your dwelling and property as soon as you’re able to – reasonably.

You want to make sure you file your claim right away. You want to really keep track of all your living expenses and keep the receipts. That’s extremely important because you may have coverage under your policy for that displacement for your home while it’s being rebuilt or whatever is happening. So, you want to make sure you keep detailed records of all of your living expenses.

You want to make sure that you keep paying your homeowner’s insurance premium. You can’t stop paying that because that’s important. That will keep you in good standing as you go through this entire process.

You want to make sure that you document every conversation that you have – the name of the person that you’re speaking with and the date that you’re speaking to them – throughout the entire claims process. So, you want to keep a journal of every conversation that you have so you can make sure that you’re fully covered for all that you’re entitled to as you go through this process.

Lastly, you don’t want to forget about the emotional impact of all this. Once you’ve found your sea legs, once you’ve gotten settled into temporary housing and you’re going through this process, you may need to get grief counseling. This is an emotionally devastating event for a lot of people. It can be just horrible. So, don’t ignore the softer side of things as you’re becoming a task master, especially if you have children involved and spouses and a family unit because everybody’s going to be dealing with it in their own individual way.

So, God forbid that you’ll ever have to go through the experience that this family did of having their entire home and all of their belongings destroyed by fire. A little bit of work on the front end, taking some of the steps that we talked about can really help mitigate some of the financial impact in the event something like this visits you. So, that’s our retirement tip of the week.

All right. Well, for our main topic today, I want to talk about retirement goals and why you need to forget about setting them, and offer you what I think might be a better way to establish financial priorities for you and your family that are more actionable and more meaningful for you.

Recently, a mentor of mine, Michael Hyatt, wrote a small blog post called “Why Retirement is a Dirty Word” and I’ll put a link to it in my show notes and I highly recommend that you read it. It talks about the history of retirement and how it really was born out of the industrial revolution and the need to retire older workers so the new younger workers could come in and take their place and keep productive capacity going.

For you and I, retirement seems a little bit foreign. It’s something that we’re told to do and I have my own thoughts in terms of the retirement planning process and I’m actually in the middle of writing a book about retirement planning and why it really needs to be revamped and some of the problems with what are the best practices in our industry today. But, when I worked with clients and counseled people over the last twenty-three years, what I saw was that few people set retirement goals, and those that did, usually, it was because they were told they needed to set retirement goals as part of the planning process which meant that very few stuck with them over the long term. Retirement goals seem to be something that we’re all told we need to have so we set them. That’s what I’ve seen over my twenty-three years and that’s what traditional planning does.

If you’re me, Roger, I’m 47, I don’t have any specific retirement plans. Most people don’t. They may have some ideas of what the might want to be doing in retirement, but they don’t know when they might be able to retire.

So, if I were to go through this retirement planning process that is the best practice of the industry right now, it’s going to say, “Okay, Roger. When do you want to retire?” “I don’t know.” “Well, I need to have a date, Roger, because I need to put it into my retirement calculator.” “Uh, okay. Say sixty.” So, you enter sixty and, “How much do you want to have when you retire in terms of income?” So, I would pick a number and then it would say, “Okay. This is the amount of money that you would need to maintain that lifestyle throughout your retirement,” and then they look at my balance sheet and my investments and they say, “Oh, Roger. I’m sorry, man. You do not have enough money to retire. So, you have two choices. You can save a heck of a lot more or you can settle for less.” And those are the basic two recommendations that we get from the normal retirement planning process – either save more or settle for less – and that’s very limiting and depressing.

No wonder statistics say only about 30 percent of us feel confident about retirement! How could we feel confident about retirement? This normal retirement planning process worked when we retired at 65 and died at 73. That was my grandfather’s generation.

Now, for people retiring now at 60, more than likely, they’re going to live to 81 or even 90. For people like, 47 – God willing – when I retire at, say, 60 in this scenario, I’ll probably live till I’m 90 because life expectancy keeps increasing and increasing. This old style of retirement planning worked for my grandfather but it doesn’t work with the kind of life expectancies that we have nowadays. It also doesn’t take into consideration how much more active we are as we age. You know, you could say the mid-60s are really 50 now. Individually, people in their 60s have a lot more to give – not just in terms of being active and traveling the world but also to give and they have more motivation to give in terms of being in the work force or making a difference or mentoring or doing other things.

So, this whole idea of retirement goals that we’re forced to set – “what’s the date?” even if we have no clue and then “how much are you going to spend?” even though we have no clue – because we’re forced to set retirement goals that way, they don’t really mean anything to us. And because they don’t mean anything to us, we end up not following it and not using it in a productive way to manage our lives better – to plan well financially so we can be better off during our later years in life.

That’s my problem with retirement goals and that’s why I say screw ‘em! There’s got to be a better way.

So, rather than set retirement goals and have that limited options of saving more or settling for less, I learned of a new way about fifteen years ago from a gentleman named David Loper who was the founder of a financial planning platform that I use for over a decade and David was just a math nerd and very interesting man.

He talked about setting financial priorities rather than goals and ranking those priorities as to what’s important to you because that’s definitely one thing that I’ve found in my practice. I can have two people that look identical on paper in terms of their age and their net worth and their family makeup, through setting priorities with them, find out that they keyed in on two very different things or priorities in their life and that should determine the type of plan that each of them would have.

So, let’s go through that scenario a little bit. First off, you want to approach it like a negotiation, and this is where we all make a lot of mistakes – I’m talking about our industry as well as individuals – in limiting how we think of what our goals should be or what our priorities should be in life, and I think most of us who are trying to be prudent, we know that all the articles out there talk about how expensive retirement is going to be in the latter half of our life is going to be so we naturally limit and mute a lot of aspirations and dreams that we might actually have, and that’s a very hard thing that I always end up having to do in working with clients – getting them to articulate what their ideal scenario is.

“If you could have everything, financially, what would that look like?” Start there. And then, go to the opposite. “Okay. What’s acceptable in your financial life now and in the future? What do you view as acceptable?” and I’ll give you some bullets that you would make these decisions or determinations on. You want to know what’s ideal and what’s acceptable. Why do you want to know those two things? I’ll tell you what those items are in a moment. The reason you want to know those things is, I think, as you set your financial priorities, really, what you’re doing is you’re setting up a negotiation with yourself.

All of the items that we’re going to talk about are give-and-takes. They may not be zero sum gain give-and-takes. But, if you want more of one, you’re going to end up having to give somewhere else.

The idea with this framework is to get you to a priority set that is actually important to you. What I’m talking about, what areas of your life do you need to have this negotiation and set your ideal scenario and your acceptable scenario.

Well, to use the vernacular of retirement – because that’s the vernacular that we all use – the first one would be, what age do you want to not work in your full-time profession or do you want to “retire”? So, acceptable might be, “Well, I could work to 65. I could do that if I had to,” and the ideal scenario might be, “I want to retire at 60. If I could pick a date, it would be when I’m 60 years old. But it’s acceptable that I realize I have to be ‘prudent’ so it could be 65.”

The second one would be, what do you want your lifestyle to be in this “retirement”? It could be, “Well, ideally, I want to spend $150,000 a year – after tax, inflation adjusted. That’s what I want to spend. I’ve got lots of things I want to do. I’ve got lots of hobbies I want to exploit. $150,000 is ideal.” Okay. What’s acceptable? “Well, acceptable, I could live a very nice life in $100,000 – after taxes and after inflation.” So, we have the ideal scenario of a lifestyle of $150,000 a year and the acceptable lifestyle of $100,000.

Now, what about current savings? You know, the typical mantra is you always need to save more. But, in an ideal world, how much would you like to save? Maybe your ideal scenario is, “Well, I would prefer not to save a dime. I’ve got kids going into college. I’ve got debt to pay off. I would like to take my wife on some trips. I want to have more balance now in my life. So, ideally, I would like to have zero savings.” And then, acceptable, “I could save $60,000 a year if I really hammered my 401K and we could take smaller vacations and I’d have to work a little bit more. But I could save and it would be acceptable to reach other goals of $70,000 or $60,000 a year.”

Fourthly, how much money do you want to leave at the end of your life? After you and your spouse are gone, do you want to leave an estate to your children or to a charity? Or do you not? And, ideally, you may come to a number like, “Oh, yeah, I want to leave $3 million to my kids. I think that would be awesome if I could do that.” And then, acceptable, and I see this more often than not, “You know what? I don’t need to leave anything to anybody. I have kids, they’re grown adults, I raised them well. They can make their own way.” So, you want to know what the ideal and the acceptable is on your state as well.

Fifthly, you want to know what your ideal and your acceptable is on the kind of investment risk you’re willing to stomach. Maybe, ideally, you don’t want to take any risk. If you could do it all with CDs, you’d be perfectly happy and not have to worry about the markets and what’s going on in the world. Or, from an acceptable standpoint, you say, “Well, I could take some risk. I can handle volatility. I’m a long-term investor. I’d prefer not to but I could handle X amount of risk,” and you’d have to define that and that’s typically what we do with clients.

And then, sixth, what are some of the extras that you want to have now or in the future? Maybe the ideal is, “I want to have a $20,000 a year vacation budget so I can take one big trip,” and maybe acceptable is, “Well, if I had to, I could do $5,000 a year so I could travel at least domestically.”

And then, lastly, what’s your ideal and acceptable for working during retirement? Because retirement is more of retiring from that full-time gig that we all naturally grow up into. Maybe, ideally, you’re like, “I never want to work again. When I walk out that door, I never want to be paid a dime from someone else ever again. I just want to be retired.” The acceptable might be, “You know, I could work part-time until I’m about 70 or until I’m not healthy any longer so I could earn some money there.”

So, if you think of your age, what your lifestyle budget would be, what your savings budget would be, what your estate plan would be in terms of leaving assets, how much investment risk you’re willing or unwilling to take, what kind of extras you want to have now or during retirement, and then whether you want to work at all during retirement or not, you’ve just set the stage for a negotiation.

Let’s review those. We had age at ideal was 60, acceptable was 65. Lifestyle was $150,000 a year, acceptable was $100,000 a year. Savings was ideally zero and acceptable was $60,000. The estate was ideally leave $3 million and acceptable was nothing. Risk was ideal zero risk and acceptable moderate risk. And then, extras was ideally $20,000 for travel and acceptable was $5,000 per travel. And then, ideally for working after retirement was not to work and acceptable was working part-time until you couldn’t any longer.

Now, we have a basis for negotiation and each person’s negotiation is going to come up differently, and this is what we do all the time with clients and it’s a healthy exercise because it helps people understand the trade-offs. The ideal “give me everything and walk out of there” and that negotiation and taking everything and the house typically doesn’t work financially, and that’s okay, it’s not meant to. If it does, you may not be thinking creatively enough.

There’s always going to have to be some negotiation away from that ideal. The key is, you want to identify what the most important things are for you, and I’ve seen all types of scenarios. I’ve had individuals where it was the age. “I had to retire at X” or at age 60 in this scenario. “I’m willing to give up a little bit of lifestyle and I’m willing to take a little bit more risk and I’m willing not to leave an estate so I can retire at 60.” I’ve had scenarios where that was the key. I’ve had other scenarios where it was, “I have to leave an estate to my kids. I was given a step-up from my parents. My parents were given a step-up. I have to make sure that I leave X amount of estate for my heirs.” That’s acceptable.

The key is having some framework into understanding where you’ll have to give in these other areas to be able to achieve the thing that’s most important to you, and that’s what I like about establishing these priorities. On paper, a lot of people all look the same, but each one of us will come to our own negotiated set of financial priorities based on our particular lifestyle.

I’ve had scenarios where it was, “You know what? I know I need to retire, but I don’t want to save so much because I want to be able to take these vacations with my kids while they’re young. I’m willing to work more later on, if I have to, so I can make sure that I spend more time with my family now.” That’s entirely reasonable and something that typically can’t be planned for in the traditional retirement sense. That’s what I like this framework of establishing priorities and setting up a negotiation with yourself because you can actually solve for saving less now.

Or, if it’s investment risk, you can quantify. If you don’t want to take any investment risk, this is how much less you’ll be able to live on, this is how much longer you’ll have to work, and this is how much smaller your estate will be. There’s no value judgments because each individual has their own set of priorities and things that they care about most.

Lastly, the thing that I like about setting these financial priorities rather than setting “retirement goals” is that whole setup of retirement goals. “If you set a goal, you have to hit it. Otherwise, you’re a failure.” Now, goals mean a lot less to people because they’re forced into that traditional planning box whereas setting financial priorities, you end up with things that mean a lot more to people. There’s something that they come to a negotiated solution to all the competing interests in their life and that’s generally what we’re all trying to do. We all want to live as well as can today without sacrificing tomorrow, and we don’t know how to do it. We don’t have frameworks to help us go through that. This type of process helps us come to that negotiated balance between living well today without sacrificing tomorrow.

The other thing I like about it is it recognizes that our situation and our financial priorities will change over time – either because of health issues or work issues or just personal circumstance – and I’ve seen this happen over and over again where I’ll work with a couple, we’ll set some financial priorities, we’ll work to manage their balance sheet and their cash flow towards their priorities. And then, in the little conversations that we have, to recheck those priorities which is always the first thing – to constantly recheck, “Is this stuff really what you still care about?” What you find is, over time, those priorities evolve.

One particular gentleman I’ve worked with for about ten years, his priority was always, at age 52, to slow down working, be in a position to where he could work half as much and make half as much income and still maintain his lifestyle long-term. We’ve worked to that priority for a long period of time. As we got closer to that date, he started to pull back from it a little bit and realized, “You know what? I’m really in a position where I’m enjoying what I’m doing so let’s reset these priorities. Let’s renegotiate my package because I’ve evolved. That’s not what I care about anymore.”

When you have life happen in the negative sense, if you’ve negotiated these priorities and you have a job loss or a health issue or a family issue – good or bad – you can come back to these priorities, reset the ideal, and reset the acceptable, and renegotiate from a position of knowledge with a proper framework to make lots of little adjustments along the way – and that’s something that traditional retirement goal planning just doesn’t do. It doesn’t recognize the fluidity – if that’s a word – of our life as we age and progress and evolve as families and as individuals.

So, that’s why I say, “Screw retirement goals!” I think setting priorities and creating a self-negotiation using a framework of establishing your ideal situation and then establishing what’s acceptable and then keying in on those areas that are most important you, and those become the basis for all of your financial decisions, and that’s why it’s so important that these things actually mean something to you.

That’s a very quick summary – well, maybe not as quick as I thought – a summary of why I think you should screw retirement goals and work on setting financial priorities that evolve as your life unfolds.

This is Roger Whitney. I want to thank you so much for joining me today.

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Until next week, be well.


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