Match the Money To the Need

In Articles, Income Planning, Investment Management, Long Term Care, Retirement Thinking, Weekly Articles by Adam Cufr

I did a radio show interview a few years ago when my book was first published. The host of the show asked me, “What’s one piece of advice you’d offer retirees who are concerned about planning their retirement?” It’s a fair question but admittedly difficult to answer in an era of sound bites. In an interview like that, I’m thinking about what the perfect answer would be if it were played as a teaser for the show. In other words, there’s a lot going through my mind when trying to formulate a response. As a result, I’m not exactly sure what actually came out of my mouth in that moment. But, here’s what I might have said if I’d known the question was coming: “Match the money to the need.”

Many retirees have done a very nice job saving for that big day, the moment when you carry the box of your desk’s contents – and your new gold watch – out of the building for the last time, never needing a traditional paycheck again. To the contrary, however, many retirees find themselves tossing and turning at night with the thought that they haven’t prepared well enough for any number of specific instances they dream up. What about a leaky roof, an unexpected drop in the stock market, a years-long nursing home stay, the premature death of their spouse? Seemingly, having a big pile of money doesn’t always quell those 3:00 AM fears, because there’s the thought that using some of the money for that thing would preclude you from using the money for another thing, eventually causing you to run out entirely. Elevated heart rate, sweaty palms, sick feeling in the stomach, sleepless night. In other words, there are too many potential disasters that come to mind to ever feel comfortable that there’s enough saved in that big pile of money to be okay.

The antidote to much of this worry is to match the money to the need. What does that mean? Breaking the ‘pile of money’ into smaller pieces that are earmarked for specific needs can have the effect of quieting the mind when concerns arise. For example, a couple who chose to deposit funds into a dedicated Long Term Care (LTC) insurance policy or dedicated LTC investment account can easily talk themselves off the proverbial ledge when the fear of ending up in a costly nursing home enters the mind. Why? They’ve done something to prepare for it. Similarly, a person who worries about running out of money by living longer than they’d expected can experience tremendous relief when they understand the lifetime income guarantees that exist in their two-bucket annuity income plan. Additionally, an investment portfolio that produces consistent stock dividend income that is deposited each quarter into an accessible spending account can calm a person’s nerves when the roof begins to leak.

A key element to all of this is to assign the worrier in a retiring couple (you know who you are!) a very useful task: write down all of the fears and concerns that enter your mind that keep you up at night and ask your retirement advisor, “How will our plan address this concern or that? What if the car breaks down, the kids need financial help, the stock market tumbles, or the doctor presents us with an awful diagnosis?” A well-built retirement plan should offer a response to each of these concerns. Only when all of your major concerns are addressed can you feel satisfied that you’ll be okay. By matching the money to the need, you create an action plan for the what-ifs life has to offer.

Too often, people retire with a vague sum of money that is without a plan. The money is simply supposed to do all things, regardless of the obstacles that appear during a long retirement. Why not give each dollar a job before retiring, by matching the money to the need? The exercise can be very cathartic, even though some people may determine they should work a bit longer to fully address their concerns. That’s okay, because it’s better to plan ahead than to always be looking over your shoulder.

A life well-lived is a plan well-built.

All the best,

Adam Cufr Signature
Adam Cufr, RICP®