Financial Planner 43551

Can There Be a Retirement Planning Formula?

In Estate Planning, Income Planning, Investment Management, Long Term Care, Retirement Thinking, Social Security, Tax Planning, The Insider by Adam Cufr

I spent last evening at a ‘Financial Aid Information Night’ to learn more about the FAFSA process. If you’re not familiar with this subject matter, it’s an acronym-laden celebration of the insanity of college costs. It’s just nuts. That said, FAFSA, or the Free Application For Federal Student Aid, is the singular means by which you apply for financial aid with the colleges that most interest your child, up to ten colleges. The FAFSA formula factors in income, assets, number of people in your household, GPA, and much more, in order to determine your EFC or Expected Family Contribution, toward college costs. The difference between the college’s cost and your EFC is what you might be awarded in financial aid. Well, all of this talk of formulas got me thinking.

For years, I’ve been on a quest to determine the optimum set of inputs to design the ideal retirement plan. And while this topic may not appeal to you, I hope you’re somewhat comforted that it does hold some appeal for me, a retirement planning guy. I’ve thought much about the ideal blend of guaranteed income sources, risk-based investments, risk management tools like insurance, cash, real estate income, part-time wages, gold, consumption items like cars, utilities, taxes, entertainment, and food. I mean, if we could come up with a formula, or even a choice of formulas to select from to set your retirement on algorithmic autopilot, wouldn’t that be incredible?

Think about it like this: if you select the #3 Retirement Plan Formula, you can expect to retire at age 62 with no debt, $6,000 of after-tax monthly income, a 3% cost of living adjustment each year, $80,000 of annual long term care funding with a 3% cost of living adjustment, and a $250,000 bequest to your heirs at death, with a 100% chance of success. Wouldn’t that be amazing? In order to accomplish this, you’d be required to save 15% of your annual income beginning at age 25, give 10% to church or charity, live in a home that cost $250,000 or less, and live on the rest. That would be your price for choosing Plan #3. It’s the ultimate set-it-and-forget-it retirement strategy; you’re a living algorithm.

So while I fantasize about this idyllic approach to retirement planning, my daydream is interrupted by…life. The cancer diagnosis at age 48, the divorce at 52, the incredible BMW ad you saw in a magazine that sent you right to the dealership, the new iPhone you simply cannot live without, the unbelievable rise in college costs, and on and on. These life events are constantly wrecking my beautiful, elegant, autopilot retirement plan idea. It really does bum me out from time to time.

It turns out the all-too-imperfect remedy for these human conditions is to communicate with one another about these life events so that the #3 Retirement Plan Formula you’ve chosen can be updated and adjusted to account for life stuff. For while I’d like to simply plan away these inevitabilities, it turns out we’re going to have to live with one another in order to ensure your plan remains on-track and as effective as possible in the face of unending change and uncertainty.

In the meantime, I’ll keep working on my formulas. Who knows, maybe there’s an ingredient I’ve overlooked that makes this all fit together elegantly. Your job then, is to keep being you and to let us know whey you experience a bit of life that may warrant a planning adjustment. In other words, we’ll be us, and you be you. Deal?

All the best,

Adam Cufr Signature
Adam Cufr, RICP®


Adam Cufr, RICP® (Retirement Income Certified Professional®) is a financial advisor and founding principal of Fourth Dimension Financial Group, LLC providing personal finance and retirement planning services. Adam is a Columnist for Retirement Advisor Magazine. He is also a sought-after media commentator and thought leader. Adam was named one of The 20 Most Creative People In Insurance in 2015 and is a columnist for Retirement Advisor Magazine and the author of Off the Record – Secrets to Building a Successful Retirement and a Lasting Legacy.

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