The Simplest Retirement Plan Ever

Written by Jeff Helms

The financial world is complex and constantly changing. Those changes can impact our clients and their plans for the future. As the firms founder and Managing Partner, making sense of these changes is my job. We try to simplify communication on market dynamics to make it meaningful and useful for our clients.

June 25, 2015


The Simplest Retirement Plan Ever-media-1

When it comes to investing for your retirement, simplifying things can go a long way toward your peace of mind. So let’s boil things down into a simple retirement plan you can follow to ensure you won’t outlive your retirement assets.

Retirement Expenses: Cost of Living & Lifestyle

When you retire, you’ll have two types of expenses. The first are “Cost of Living” expenses. These are non-negotiable expenses that must be paid for each month. Examples include a mortgage (or rent), groceries, car payments, phone bills, utilities, etc. These are – quite simply – the costs of living.

The second types of expenses you’ll incur are lifestyle expenses. These are the things that make life worth living. Visiting grandchildren, golf club memberships, cruises, travel, etc.

Everyone has some level of expense in both of these categories. Simple enough.

Retirement Income Sources: Insured & Investment

Conveniently, you will also have two sources of retirement income when you retire. Let’s simplify them as well. The first is “insured income“, meaning that it is a predictable, sustainable, guaranteed source of monthly income that will last the rest of your life. It’s worth noting there are only three of these: Pensions, Social Security, and annuities. The guarantees are only as good as the institutions backing them.

The second type of retirement income you’ll have is investment income. This income is generated from your retirement plans, your investment/brokerage accounts, rental income, etc. While it’s not guaranteed to last forever like your insured income, if it is properly diversified and managed, it should be able to supplement your insured income in your retirement years.

The Plan: Match Income to Expense

So here’s where your plan comes together simply and elegantly: you should make sure that your insured sources of income (pensions, Social Security, and annuities) will comfortably cover your cost of living expenses. If they do, you’ll have the peace of mind of knowing you can always pay the bills each month.

Next, match your investment income against your lifestyle expenses. Your portfolio should fuel your lifestyle. That is – in good years, you can afford to take that extra vacation or stash away the gains for a rainy day. In lean years, perhaps you throttle back a little bit on extravagant expenses until conditions improve.

The point is — you can’t control the costs of living, but you can control your lifestyle. So match your income sources and your expenses up properly, and monitor them each year. If you’d like some help figuring it out, give us a call today. First Coast Wealth Advisors is a team dedicated to helping successful families make smart financial decisions with their wealth management in St. Augustine, Ponte Vedra and Jacksonville.