personal finance

Retirement: It All Starts with a Budget

When you’re meeting with your financial planner, do you talk about your budget? If not, you should.

I have endlessly been amazed at how often financial advisers focus only on managing money in the market as people approach retirement. Nothing good happens to people in retirement without a proper income plan, and yes, that involves assets that grow, but it also requires intense scrutinization of cash flow and expenditures.

Yes, it is important to have assets, and yes it is important to obtain a satisfactory rate of return. Still, if expenditures are not properly balanced for the amount of assets the persons have, the end result can be disastrous.  Unfortunately, I do not see most advisers take the time and effort to actually review their clients’ budgets to determine whether expectations for the assets are adequate or not.

Some Millionaires Can’t Afford to Retire

I meet with people on a regular basis, and rarely do I find them to have a budget. Even though they have worked with a financial adviser for years, they are still guessing how much money they actually need in retirement to cover, not just their basic needs, but also their desired lifestyle. People come to my office, usually as excellent savers. Professionals who have faithfully put away hundreds of thousands of dollars (often millions) in their 401(k)s, and yet they are not sure they have enough.

Why is that? Well, there can be many reasons, but they have at least one thing in common: No budget. I have seen people with $5 million, and as it turns out, it is not enough — because their spending is too high for the assets they have. Yes, they have enough to "get by," but a person or couple who have saved that much often have a lifestyle they want to maintain in retirement as well. Had they just looked at and created a budget, they would not be so surprised that they will not be able to live the lifestyle they are accustomed to now they are entering retirement.

Financial Advisers Sometimes Drop the Ball

Their current financial adviser consistently reviewed their return rate on their investments, but it rarely went beyond that. They never checked the "what ifs." What if I die too young? What if I live too long? What if my taxes go up in retirement? What if the market drops dramatically early in retirement? What if my spouse goes into a nursing home or we get divorced? How much of a pension is left if my spouse passes away?

I think you get my point. It starts with a budget and goes forward from there.

Retirement is all about cash flow! When a spouse passes away, taxes go up on the remaining spouse. How do you keep the cash flow intact? Cash flow, cash flow cash flow.

Investments are just a part of the equation. Managing risks to the cash flow is another part of the equation. Knowing and managing expenditures is part of the equation. Unfortunately, it is commonly ignored by financial advisers. If yours has ignored it, bring it up yourself. Get your concerns addressed, and for heaven’s sake, get a budget.

About the Author

Pete Cymbalak, Retirement Planner and IAR

Founder, Empowered Financial Management

Pete Cymbalak is a financial professional with over 20 years of experience, focused on retirement strategies and asset preservations.  He is well-recognized as the host of the “Empowered Retirement” radio show airing Saturday on iHeartMedia at 9 am. He has been featured at the NASDAQ and Harvard Business Club of New York City.  Pete holds his values and ethics in the highest respect, which is evident in how he educates, advises and puts his clients’ best interests first.

Most Popular

How a Third Stimulus Check Could Differ From the First and Second Payments
Coronavirus and Your Money

How a Third Stimulus Check Could Differ From the First and Second Payments

There's a big push in Washington for a third round of stimulus payments. But the amount and eligibility rules for your third stimulus check could be d…
January 27, 2021
Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your second stimulus check.
January 18, 2021
Biden's Stimulus Plan Includes $3,000 Child Tax Credits
Coronavirus and Your Money

Biden's Stimulus Plan Includes $3,000 Child Tax Credits

The president is calling for a temporary tax credit of $3,000 per child (more for younger children).
January 27, 2021

Recommended

Divorce Tips to Avoid a Messy Dog Custody Battle
Divorce

Divorce Tips to Avoid a Messy Dog Custody Battle

Before you get barking mad and take your fight to court, think about the consequences. Talking it out is almost always the better route, advises an an…
January 28, 2021
How to Address Retirees’ No. 1 Concern
retirement planning

How to Address Retirees’ No. 1 Concern

It’s a top worry for people nearing retirement: the fear of running out of money. By preparing for retirement with an income plan, you can feel confid…
January 27, 2021
Income Planning to Help You Win the Retirement Trifecta
retirement planning

Income Planning to Help You Win the Retirement Trifecta

With a retirement income plan that focuses on the allocation of income, and delivers lower fees and taxes, you can increase your income with less risk…
January 26, 2021
6 Stocks to Watch for a Return to Normalcy in 2021
stocks

6 Stocks to Watch for a Return to Normalcy in 2021

The COVID-19 crisis has been hard on many sectors, but as the tide starts to turn on the pandemic, these six companies appear ready for takeoff.
January 25, 2021