Whether you want to travel the world, spend time with family or pick up a new hobby, your retirement is personal. Preparing for retirement and knowing the right questions to think about in advance can help make sure that your retirement will align with your needs and goals. Jamie Hudgins, Private Financial Advisor with SunTrust Investment Services, Inc. (STIS), helps answer questions and offers advice as you look ahead to retirement.
How can a financial plan prepare people for the experiences they hope to have in retirement?
Financial planning lays out the spending that you’re going to have during your retirement. Financial planning may clear up the cloud of uncertainty so you can see where are you today and where you want to be in the future.
We often ask clients to paint a picture of what retirement looks like. What do you see yourself doing? Do you have an active lifestyle? What about travel? It’s really a conversation, not necessarily trying to look into a crystal ball. It's going to be different for everybody—someone could have $2 million saved for retirement, but if they’re spending $200,000 per year, their savings will deplete quickly.
Should people try to predict the kind of lifestyle that they want and save for it, or should they assess their current situation and try to match their goals to that?
That's the good thing about financial planning—it can be individualized. But it's best to look at your lifestyle today and say, "What would I do differently?” Individualized financial planning walks you through that conversation, looking at your current income and expenses. What are your assets today? What are you saving today toward retirement? What is the impact based on your expenses?
We also look at what expenses you may not have in the future. Maybe you have a mortgage now, but it will be paid off into retirement. Maybe you're going to be paying for a child’s college education early in your retirement. All of these factors are why we individualize the approach.
How can people match their finances to their vision of retirement?
You have to look at what your expenses are. That's the biggest component of retirement planning. You could make all the money in the world, but if you're spending just as much as you're making, it's going to be really tough to achieve financial independence, which is having enough capital and assets that work for you so that one day, work is optional and retirement is affordable.
People often ask how they can make their money last longer. Well, a lot of it is being invested and staying invested according to your plan. We have to talk about things like risk. People have a very real fear of losing all of their money, but that's why it’s important to be realistic about your risk tolerance and about your savings goals.
How can people remain financially flexible in the face of the unexpected, like an economic downturn or a major personal expense?
Talking about unanticipated expenses is at the forefront of conversations we have with clients. We ask, “What keeps you up at night?” Some of the most common events people might encounter in retirement are healthcare or extended care needs, caring for an aging parent or an unanticipated move to a new home, perhaps based on health needs. If you required extended care that might cost $80,000 a year, what assets would you use to be able to pay for this expense? If you had a $5,000 expense today, what would you use to pay that?
And of course, many individuals will retire during a year when the market is down. I mean, it happens—people still retired in 2008. It’s all about being realistic with timing, risk, and most importantly, how much money you're taking out of your portfolio to achieve your goals.
It’s our job as financial advisors to help turn those conversations from “I’m afraid about this” to “I’ve got confidence, and I know that I am achieving my goals."
Why is it important to meet regularly with an advisor?
There needs to be that gut check of knowing you likely need expert help. If you wanted to learn how to speak Spanish or French, could you go online and figure that out in an hour? Probably not. You might be able to say a few words, but would you be an expert? The answer is no.
So while you can research online how to build a financial plan or how to build a financial portfolio, an advisor gets to find out about you to help you meet your individual goals. You can look into somebody’s eyes and say, “These are the things that are important to me. This is what I have. This is where I’m at. What can I do differently? What should I do differently? Am I doing anything well?”
It takes time to build trust with somebody, but you want to be able to have that confidence that you are working with somebody that's going to provide prudent and thoughtful advice to help you achieve your long-term financial goals.