Three Details That Matter for a Successful Retirement

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Fictional crime fighter Jack Reacher doesn’t offer retirement advice (at least not to my knowledge), but one of his quotes does resonate with me: “In an investigation, details matter.”

The same can be said for retirement planning.

Unfortunately, too many people planning for retirement sidestep the details that could help them create a stronger plan that would better match their needs. Instead, they skip straight to the solutions, choosing investment options without taking the time to determine what is actually needed or taking into consideration all the individual circumstances that can come into play when deciding the best way to proceed.

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Maybe with this process, they will hit the mark. But just as likely — or more likely — they will miss it completely.

Imagine if a surgeon worked this way. Instead of studying your symptoms, checking your vital signs and running tests before deciding whether to operate, the surgeon just said, “Let’s go straight to cutting you open and see what we find.”

Personally, I would prefer a more detail-oriented surgeon.

For your retirement, you should be detail-oriented, as well.

Taking the right amount of risk

That means starting by looking at where you are today. What income and expenses do you have? What retirement savings have you already accumulated? How far out are you from retirement (five years? 10 years?), and what will your needs be when you get there?

There is also the matter of risk. How much risk do you want to take with your investments? How much risk can you really afford? And are you truly aware of how much risk you have in your portfolio right now?

When I work with clients, one of the first things I do is establish a risk score for them, which helps the client — and me — better understand where they fall in terms of risk tolerance and how that meshes with their current investments. People are often surprised to learn they are taking more risk than they realized.

Sometimes this is because they didn’t understand just how risky a particular investment was. But sometimes it is because they made investment decisions long ago and then didn’t revisit those decisions as time passed. That is somewhat common with 401(k) plans. People open their 401(k) account when they join a new employer, choose from a set list of investment options that the plan offers and then just let those choices ride.

If that scenario describes you, it might be worth taking a look at the details of the 401(k) option you chose years ago to see if it is still what you want and makes sense for your current retirement plans. Maybe it’s fine, especially if you chose a target-date fund that was tied to your age. But it’s important to know for certain in case an adjustment is warranted.

Delving into the details of your finances, your lifestyle and your expectations for retirement can also reveal inefficiencies. Not long ago, I had a client who, because of the way his finances were structured, was paying more than he needed to in taxes.

The discovery of that detail ended up reducing his tax bill and saving him money.

The big impact of small adjustments

Another detail people sometimes overlook is the way relatively minuscule changes can lead to big results.

We often look at financially successful people and erroneously conclude that their accomplishments (and wealth) happened quickly and dramatically, like the retirement planning version of a lottery winner.

It usually doesn’t occur that way.

Instead, the person probably built their wealth bit by bit by making decisions that didn’t provide enormous earnings in the short term but paid off over time. You can do the same with your retirement planning.

One of the best examples of this is contributions to your 401(k) plan. Many employers match your contributions up to a certain percentage point. I often find, though, that people fail to make sure they are contributing enough to receive the full company match.

The employer might match an employee contribution up to 5%, for example, but the person is contributing only 4% of their weekly pay. That extra 1% of free money seems insignificant — and more or less is if you think only in terms of one week or one month. But when you start talking about every paycheck over years or even decades, those dollars add up, especially when you also factor in any investment gains over that time.

Suddenly, that extra $20 or $30 a week (or whatever it might be) no longer seems so negligible.

A lack of estate planning

Another surprising financial planning detail people often overlook (even wealthy and famous people) is the importance of estate planning. They never take the time to create a will, a trust or anything that helps make sure their wishes are known for how their estate will be passed on to their heirs.

Howard Hughes, Pablo Picasso and Prince are a few examples of celebrities who died without a will, leaving others to puzzle out and argue over their wishes. In Prince’s case, it took six years of legal battles before his $300 million estate could be settled.

This is not something you want to leave to chance, the courts or feuding relatives. If you work on the details of your estate, not only can you ensure your money will go to the people or charities that you prefer, but you may also be able to improve the tax implications for your heirs.

Sadly, with retirement planning, it’s easy to overlook the details. That’s why it’s important to meet with a financial professional who also cares about the details and has the skill and knowledge to help you with them.

Because the details really do matter.

Just ask Jack Reacher.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mark Gelbman is the owner and adviser at Strategic Wealth Solutions in Urbandale, Iowa, who has more than 20 years of experience helping clients achieve their financial planning goals. His certifications include the CFP®, CLU®, CRPC® and AAMS® designations. Gelbman believes that the key to achieving financial planning success is taking that first step and implementing incremental change rather than radical change.