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The hardest retirement question to answer isn't about how much money you will need

Mitch Goldberg
Uncle Sam recently announced that retirees should pay close attention to their pension checks and ensure that they're withholding sufficient taxes. Here's how to simplify these payments.

In order to accomplish a goal, most of the time it is best to work backward: Make the goal very specific, and determine the steps you have to start taking now in order to reach it. But what if you really don't know what your specific goal is? That makes all of your planning, from beginning to end, overly flexible and involves faulty assumptions. Measuring progress toward your goal based on how you feel can be meaningless without accurate data.

This is why the toughest question I ask my new clients may surprise you: At what age do you want to retire?

Most of the time they only have a vague idea, not an exact number, which makes today's financial recommendations somewhat (if not overly) reliant on guesswork when it comes to planning the steps to accomplish the goal.

At face value it's a simple question. Now try to answer it with an exact age. You could see the variables swirling around in your mind: How much money do you have saved up now? How much more will you have to add to a retirement plan? When should you begin claiming Social Security? Where will you be living? What is your personal vision of retirement? How much will your health-care costs be? And do you even want to become fully retired?


Oldest workers are fastest-growing US labor force

The average retirement age today is 66 — and rising.

Government forecasts suggest that retirement age will remain a moving target, and increasingly it is being pushed further off into the future. By 2026 the Bureau of Labor Statistics projects there will be 108 million Americans age 55 and older; 29 million are expected to be age 75 and older. The 65- to 74-year-old and 75-and-older age groups are projected to have the fastest growth rates among all age groups in the period between 2016 and 2026; the same is true in the labor force, with workers 55 and over leading growth.

This is not new — even with the annual growth rate of workers age 55 and over expected to lead among all age groups through 2026 (at 1.7 percent), it actually is slowing. It was 4.8 percent from 1996–2006. Either way, it remains a driving force in demographics and retirement decision-making.

One all too common way to think about retirement that I see among prospective clients is to just save and invest as much as possible and see how far that'll take them when they reach their 60s. Investors can do better than that.

The average life expectancy in the United States for a female is now over 80 and about 79 for a male. When Franklin Delano Roosevelt created Social Security, the average life expectancy of an American was 61. A married couple, with both spouses having worked full time and putting off retirement until they reach FRA (full retirement age), could receive nearly $60,000 in Social Security benefit annually, with a cost-of-living-adjustment adding to that every year. That’s not enough to live on for a comfortable retirement, but it is still a decent-sized chunk of income that will pay a lot of bills.

From my perspective as an advisor, I believe the retirement-age question should come before the questions about the financial value of investment accounts. That’s the wrong starting point. It implies the wrong motivation on behalf of the advisor, too, that they are interested only in the assets-under-management fee.

My clients run the gamut, from those who could easily afford to retire right now to those who are just starting out in their adult life. Some still work because it is their choice, and some still work because they are insecure (rightly or not) about how long their money will last during retirement. Many are currently enjoying their retirement.


Even if you can't pick an exact age at which you want to retire, it is still important to get to an age based on your conceptual thoughts, because it provides the goal to work backward from. You can always make adjustments as you move along, so it’s better to understand the possible steps and outcomes you face sooner rather than later.

You may discover that your needs, wants and wishes for retirement may need to be reprioritized. Judgment calls will need to be made on working longer, budgeting for retirement travel, current contributions to a child’s 529 college savings plan, etc. The age question, and the process that follows it, will help make you smarter about your finances and better positioned to reach the goal you started with, raising your potential for a successful retirement.

Experts now recommend that investors complete a retirement policy statement. But younger individuals could benefit greatly by thinking about retirement age well before the time comes so they can develop an investment policy statement and reach their goals. Getting to a specific answer, an exact year, may be possible — but it is not the point; it is a guide. When people aren’t realistic, they can’t realize a plan.

There are many fundamental investment decisions that will need to be made regardless of an expected retirement age. Does an investor fund a 529 college savings plan if they have children, or do they max out a 401(k ) to get the full employer match, even if it means loans and financial aid for college? How will the asset allocation of a portfolio shift over time between stocks and bonds as the investor moves from the accumulation phase of investing life to the preservation and income phase?

But take a step back: The basic goal of retirement planning is not to be blindsided when you get to that moment. Having some idea when you think that moment will actually arrive is part of operating with eyes wide open and making the right decisions.

By Mitch Goldberg, president of investment advisory firm ClientFirst Strategy