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Retirement: How to Wrap Your Mind Around It

Mario Mancuso

Sometimes the dumbest thing you can do is not ask a stupid question.

Maybe you have no idea where to start in thinking about retirement planning. And so you think asking about it might be a so-called stupid question.

Well, if that’s you, it isn’t a stupid question – it’s a good one.

So congratulations for just asking! Asking is the first step to gaining wisdom. Acting on what you’ve learned is the second (and most important) step.

The most basic reason a person works is to trade his time and energy (a.k.a., work) for money (an income). Unless something is done about it, when you stop working, your income stops too.

1. Income. So the most basic component of retirement planning is to provide an income stream. This is very important to understand. Your goal in basic retirement planning should not be to build up a large account balance in your retirement plan or to have $1,000,000 in a mutual fund. Those may be steps along the way to your ultimate goal, but they are not the goal itself.

Sometimes I call retirement income “mailbox money monthly.” When I retire, I want to know that a predictable and sizeable check will hit my mailbox (or my in-box, as the case may be) each month. I am looking for consistency, predictability and safety.

I am amazed at how many people have not thought about how they plan to translate their retirement savings assets into a safe, predictable retirement income stream.

2. Safety net. Now, we know everything will not go according to plan, so we’re going to need a safety net in place. That means appropriate insurance policies to protect us against the assorted perils of life, along with specialized types of policies especially for retired folks.

These might include: Medigap insurance to pay certain costs not covered by Medicare; long-term care insurance to pay for costs associated with care for you if you ever need skilled nursing care on a long-term basis, whether in your home or in a nursing home facility (by the way, unless you’ve experienced it, you may not be aware that the cost of providing full-time skilled nursing care in your home is more expensive than actually moving into a nursing home.)

3. Liquidity. That’s fancy talk for cash. You’re going to need some cash that is available, and therefore (perhaps) not especially productive. This will cover large, irregular expenses, such as a new car, a new roof, a new refrigerator or maybe a new knee.

4. Legacy. This one is often the most precious to the heart of a retired person, but must always fall to the bottom of the list. If you cannot provide for your income, your safety net and your liquidity, you’ll have nothing left to pass on to leave a legacy.

A good financial plan should seek to achieve as many of these goals as possible as efficiently as possible.

Start now for the best outcome achievable.

And by all means, keep asking questions…even the dumb ones!

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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