Plan for Retirement – Planning Guide

When can I retire? It seems like such a simple question; one question, four words, one date. Why then have I spent countless hours pondering this question with no clearcut answer in sight? Every detail I research leads to another series of questions; each its own descent into a new rabbit hole. Sound familiar?

As I have tried to figure out when I can retire, it has been helpful to me to create a framework for approaching the problem of how to plan for retirement which I will detail in this first installment of the retirement planning guide. I will also cover retirement strategies, tips, and considerations along the way.

Retirement Planning Framework

• Fundamentals
• Factors
• Levers
• Time Boxes
• Contingencies

Retirement planning can be time consuming, frustrating, exhausting, and at many times overwhelming. I think the first step in succeeding is to simply acknowledge that fact. Acknowledge that you don’t have all the answers, and that you are going to need help to achieve this goal. Help comes in many forms; articles you read, advice from a family member, a conversation with a friend, a recommended book, a professional advisor.

My engineering mind likes to break down overwhelming problems into a series of smaller obstacles, and then apply retirement strategies to tackle those one step at a time. That is my plan as I try to answer this difficult (but also exciting) question for myself.

Retirement Plan Fundamentals

The core building blocks of your retirement plan, all other questions and complexities eventually roll up to two simple things: income and expenses. If your retirement income meets or exceeds your retirement expenses, then you have won the chess game of retirement. Therefore, one of the most important things we need to do is to create a retirement budget which will be the focus of an upcoming installment of our retirement planning guide. I will also share retirement tips that helped me in my own budget.

Retirement Plan Factors (less deterministic)

Factors are things that have a strong influence on your overall retirement financial picture, but which you cannot exactly predict or control. These factors include things like inflation rate, life expectancy, and the rate of return on your investments. Granted, you can influence your life expectancy via lifestyle choices, and you can influence your rate of return via portfolio allocations, however the point is that for planning purposes there is no way to know what these exact numbers will be in retirement. It will be critical to understand these factors as we plan for retirement.

Retirement Plan Levers (more deterministic)

Similar to factors, levers also have a strong influence on your retirement planning strategies. The difference, however, is that levers are things that you are more likely to be able to identify, plan for, and sometimes control. Levers include things like retirement age, social-security commencement age, discretionary expenses, type of housing (affects predictability of expenses), and housing location (affects taxes and cost of living). You may not have full control over all of these levers, but at least you are likely able to determine what they are for your situation, and therefore deterministically plan for them. For example, you may not be in a position where you can decide to move to a different state with lower taxes and cost of living, but at least you can plan for those costs for the state you do live in. I will explore these levers in detail in upcoming articles in this retirement planning guide, and provide some retirement tips to help.

Retirement Time Boxes

One of the things that has been most surprising to me in my retirement research so far is the fact that the majority of calculators and planning tools assume that your retirement budget will be the same throughout your retirement. I believe this is a fundamentally flawed assumption for pretty much everybody. What if I retire before 65 and have to buy private health care for a few years? How about if I decide to wait a few years before taking Social Security? What if I plan to move to a place with a different cost of living partway through retirement? Aren’t my medical expenses likely to increase as I get older? Won’t my discretionary expenses likely decrease as I get older? This is where time boxes come in.

A time box is a fixed block of time during your retirement which has a set of known (or at least likely) characteristics that affect your income and/or expenses during that time period. Consider this hypothetical example:

Plan for Retirement Contingencies

No matter how accurately you make your plan for retirement, there is always going to be the potential for unexpected and unwelcome surprises. This is where contingency planning comes in. Whether your furnace breaks, your car gets totaled in an accident, you or your spouse/partner experience a major medical problem, a family member or friend requires unexpected financial support, or climate or geopolitical factors impact the place you live, it is important to consider and plan for how you would handle such things during retirement. Upcoming articles in our retirement planning guide will discuss retirement tips and strategies for contingencies.

What’s Next

In this post, I have laid out my ambitious goal to create my plan for retirement, and to share my leanings with you through this retirement planning guide. I have recognized and acknowledged the many challenges of achieving that goal. I have established a framework that I can use to approach the problem, and my intention now is to tackle that problem in a step-by-step manner until I achieve my goal. With this in mind, my next post will cover potential retirement planning approaches to cracking this nut. Calculators, consolidators, spreadsheets, and advisors – oh my! I’m excited to get started, and I hope that what I learn and share will help you in your own retirement-planning journey.

As I begin this journey, let me clearly acknowledge the fact that I am not a financial or retirement expert. As a person with an analytical mind who enjoys reading and research, I hope to be able to learn and share a great deal of relevant information that will help me (and hopefully you) answer the burning question “When can I retire?”. The learnings that I share are not a substitute for professional financial and retirement planning. I plan to consult with professional advisors along the way, and I strongly recommend that you do the same.