Matthew Horsley
ABOUT Matthew

Matt Horsley has been serving individuals and families to meet their retirement, estate, investment and tax planning needs since 1993. Matt currently serves as an Investment Advisor Representative with Pure Financial Advisors, LLC where he works directly with clients to help them realize their specific financial objectives. Prior to joining Pure Financial Advisors, Matt served [...]

The vast majority of Americans have not spent the time and resources necessary to ensure a healthy and financially successful retirement – that’s the bad news. The good news is that for most of us, there is still time to update your financial plan and goals to give us all the best chance at a great, stress-free retirement! Matthew Horsley, CFP®, AIF®, walks you through a checkup to make sure you have a healthy and robust retirement plan.

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A vast majority of Americans haven’t spent the time required to ensure healthy and financially secure retirement. That’s the bad news. The good news is for most of us, there’s still time to update your financial plan and your goals to give you the best chance to have that stress-free retirement. So, today I’m going to walk you through sort of a check-up to make sure you have a healthy retirement plan. I think this is valuable for everyone, whether young and just starting your career, in the middle, the end of your career, or you’re already retired.

Take Stock of Your Available Resources

So, number one, take stock of your available resources before you know we were going, you got to figure out where we’re at today. Most people don’t take a regular financial inventory or a net worth statement, so I’d say once a year, track this and update it every year. It’s basically taking all of your assets, including your after-tax brokerage accounts, IRA’s, 401K’s, Roth IRA’s, investments, real estate, and any other assets you have, and then subtracting liabilities. This can be mortgage loans, credit card debt, etc. This is to give your current net worth a pretty good place to start.

Create a Cash Flow Statement

Next, create a cash flow statement when trying to figure out what you’re going to need in retirement, you’ve got to first determine what you’re spending today. Be honest with yourself. Most people tend to underestimate what they’re currently spending. A quick way to do this is look at your take-home pay. This is like what your income is after taxes and retirement contributions. Then, look at your savings and checking account. Are you able to save money each month, or are you spending most of what you’re bringing home? There’s plenty of free net worth and cash flow statements available online to help with this.

Project Your Fixed Income Streams at Retirement

Next, project what your fixed income stream is going to look like in retirement. This is going to include Social Security, any pensions, income from investments, and real estate that you have.

Determine your Shortfall

Four, determine what your shortfall is going to be. So, let’s say I want to spend $120,000 a year in retirement. If I have $60,000 coming in from Social Security and my pension, I need another $60,000 a year from my investments to get that goal. So, now, if I need $60,000 a year, I know that I’m going to roughly need to save $2 million to produce that $60,000 a year, so if I have $2 million and I’m pulling 3% per year from that, then that’s going to create that $60,000 shortfall that I need.

Plan for Taxes and Inflation

Now plan for taxes and inflation, so don’t forget about tax. Tax inflation are the two biggest things I see people underestimate when they’re doing their planning work. We all believe that we pay way too much in tax today. Most people come in and see us have the vast bulk of their liquid investments in plans like 401K’s, TSPs, IRA’s, things like that. It’s great ’cause the money went into pre-tax, but it also means is in retirement, you’re going to pay ordinary income tax when you pull that money out. When you add, on top of that, Social Security and your pension, you may be paying even more, higher taxes in retirement than you are during your working years. So, what can you do? If you’re younger, put in as much money into Roth as you can. Roth IRA’s, Roth 401K’s. You’re not going to get a tax break today, but all that money is growing tax-free for the rest of your life. Okay, if you’re already retired, and you haven’t reached age 72 yet, consider converting to Roth IRA’s now. The catch is you have to pay the tax today maybe don’t convert all of your money today, but the goal is to try to start moving money into Roth as much as you can, so you have three different sources of income in retirement. Pull money from Roth, which is tax-free, IRA’s, which is ordinary income, and your after-tax accounts which would be capital gains. So now you can keep yourself in the lowest brackets and pay the least amount of tax for the rest of your life. Also making sure you’re paying attention to inflation. We all know the cost of everything that we do is going to increase every year.

Invest Toward Your Goals

Now that you’ve done all this hard work. You can determine how you should be investing your portfolio. Most people come in and sit down with us, and they have no idea what their target rate of return is from their portfolio ’cause they haven’t done this word to figure out their cash flow statements, net worth, and all this other stuff that we’ve talked about. Okay, once you do that, now you can feel it. Okay, well, based upon what I’ve saved, what I need is save and I have a proper tax planning strategy in place; now I know I need to achieve a goal. Let’s say it’s 7%. I call this your family index, now you can build your portfolio around that goal. Diversify your portfolio around stocks, bonds, real estate, United States stocks, international stocks. Diversify properly. Don’t try to time the market, do me that favor. So, whether you’re working with an advisor or doing this stuff on your own, build that portfolio properly. Okay, the last thing I wanted remind you guys to do is pay attention to your fees. Most people are paying way too much in fees with the investments that they’re holding.

Protect You and Your Family

Finally, protect your family and the assets that you’ve built. If you’re younger, you have a family to protect make sure that you have proper amount of life insurance for you and your partner. Your biggest asset you have is your ability to earn a living. Make sure that that’s protected through disability insurance if that’s possible. Finally, estate planning. Sit down with a qualified estate planning attorney if you haven’t already done so. Develop your trust powers of attorney, etc., and review those once every couple of years. So, I hope you pass you check-up with flying colors or discovered a few things you may need to work on to ensure a clean bill of health for your retirement plan.

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• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.

• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.

AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.