Written By: Matt Jaskolka

A couple weekends ago around a fire pit, I had an enjoyable conversation with friends about life, our careers, our aspirations, and so on. Naturally, one of the questions directed to me was, “How do you know if someone is ready for retirement? What do you tell your clients or people who come to see you?” My immediate response was “cash flow.” Puzzled, my friends thought I was going to say something about having a million-dollar investment portfolio. Although that is certainly nice to have, a large investment portfolio is not everything to everyone, and portfolio size is certainly not the only thing a responsible advisor looks at when consulting their clients on retirement. So, how do we determine when enough is enough? 

One piece of feedback I get from folks relates to Carlson Financial’s attention to detail on a client’s Income Plan. The entire Financial Plan is one thing, but specifically, how do we build out your streams of income now and into the future? In my opinion, your financial advisor should always address your income needs first, not your portfolio. All too often when you are identifying an advisor or firm to work with, they normally start by asking you about the size of your portfolio, your risk tolerance, and time horizon. While these items are all important for the big picture, I think it is the wrong approach to start with. After all, how can I properly invest your assets if I do not know how dependent you will be on your savings?

If you are a client or reader of our Financial Friday blogs, you know by now that our approach to comprehensive financial planning starts with your income and expenses. Why? Because when people fill out our questionnaire before our first meeting together, most of the time their biggest concerns are, “Where am I getting my income from in retirement? Will I be okay once I stop earning my paycheck? Will Social Security be enough to maintain my standard of living? Will Social Security be around for me to draw from?” These are not the only questions I receive, but they seem to be the questions that cause the most worry. The first step to address these concerns is by writing down all your anticipated income and expenses in retirement. Look at your Social Security statement. What will the dollar values be at age 62 until age 70? Do you have a pension? Does that pension receive cost-of-living adjustments (COLA)? How are those COLA adjustments calculated and will they be capped?  Are you receiving income from a rental property? Do you receive or pay alimony? If so, when, if ever, will that end? Have you considered planning for a Social Security benefit that might be 23% less than anticipated?¹ How is your portfolio going to be used to supplement your income? Answering these questions helps us to determine when you can afford to stop working. Our financial planning tools allow us to integrate your answers and determine a sustainable withdrawal strategy that will allow you to enjoy your retirement. 

One side of the cash flow coin is inflows, the other is outflows. Now that you know your income sources and their expected values, let us turn the focus to your expenses. For a lot of people, they grow accustomed to their spending habits based on the paycheck they earn or the income they draw from their business. Questions I like to ask are, “Do you anticipate spending more or less in retirement? How have you structured your budget in retirement? Do you have a budget or a money journal? How are you keeping track of your expenditures? Do you have a history of illness in your family? What are your thoughts about long-term care and the impact it can have not only financially but emotionally?”  Ultimately, the question boils down to: What do you want from your retirement? I am not just thinking about a new car or a new home, but how will you fill your time? What hobbies would you like to be involved with? What are the things that will lift your spirit and get you excited about tomorrow? Of course, I cannot answer the spiritual questions for you, but I can help address how to fund the things that matter most to you. 

My happiest clients are not those with the biggest portfolios, but with monthly income that exceeds their expenses and are living the life they want without being reliant on their portfolio for monthly distributions. How we make this happen is tailored to the individual and their customized Financial Plan. By not being handcuffed to the performance of their investments for their income needs, they are in a better position to weather most economic storms. By working with a Carlson Financial advisor, they know how to utilize their hard-earned savings to achieve the things they always wanted to achieve. They are not alone in these decisions, and they have peace of mind. Isn’t that why you work with an advisor in the first place?

Say What?

Fun facts about life insurance:

• In 2022 106 million American adults were without life insurance or considered underinsured.
• 50 percent of Americans reported owning life insurance in 2022.
• More than 50 percent of Americans overestimate the cost of life insurance by 300 percent.
• In 2021, insurance benefits and claims totaled $790.8 billion, according to the Insurance Information Institute. 

This week in history

1982 – Jane Fonda’s first workout video was released. 

1986 – The Chernobyl nuclear disaster occurred, resulting in 32 deaths and dozens more suffering radiation burns. 

1993 (30 years ago) – World Wide Web (WWW) launches in the public domain. 

2004 – The World War II monument opens in Washington, D.C.

¹ https://www.cnbc.com/select/will-social-security-run-out-heres-what-you-need-to-know/

If you have any questions, we’d love to chat! Call us at 844-CARLSON (227-5766) today!