Retirement Planning Roadmap (Also, Two Books Updated for 2018)

A quick bit of news for today: the 2018 editions of my book about sole proprietor taxes and my LLC vs. S-Corp vs. C-Corp book are now available. Each book now reflects the new 2018 tax law (including the new deduction for pass-through business income, among other things).

So, of the six books that needed updates to reflect 2018 tax law, five are now finished. (Can I Retire? is the one that is still in the works.)

I recently came across a new publication from Vanguard Research, which they are calling their “Roadmap to Financial Security.” In short, it’s a how-to guide to actually creating a retirement plan.

If you’re working with a financial planner for your retirement planning, presumably they have a process of their own. But for people taking a DIY approach to retirement planning, Vanguard’s paper does a good job of laying out an explicit process for creating a plan.

Specifically, it’s a four-step process, with an aim at achieving financial security, which they define as “the peace of mind that results when retirees feel confident that they will attain all of their financial goals and be able to continue doing so in the future.”

Step one is to determine retirement goals. They make a point of noting that for most people there’s not a single goal of “retirement,” but rather four separate categories of goals — basic living expenses, contingency reserve, discretionary expenses, and legacy funding — the magnitude and importance of which will vary from one person to another.

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Step two is to understand the risks. They describe five major risk categories: market risk, health risk, longevity and mortality risk, event risk (i.e., major unplanned expenses), and tax and policy risk. Again, the significance of each will vary from one person to another — as will the solutions selected to manage those risks.

Step three is to assess the available financial resources, such as guaranteed income (e.g., pension, Social Security, lifetime annuity), liquid assets, and other resources (e.g., insurance, home equity, work).

And step four is to develop a plan to achieve goals and mitigate risks. This is the step where you bring everything together (i.e., where you actually determine how to deploy those resources to best achieve your goals in the face of the relevant risks).

I like it. It’s nothing fancy (and nothing super detailed), but it’s clear and easy to follow. You’re essentially building a retirement balance sheet. On one side you have the liabilities that you will have to fund (i.e., the goals you intend to pay for). On the other side, you have your financial resources. And you take the time to consider risks — both risks to those resources as well as risks that might increase the size of the liabilities.

What is the Best Age to Claim Social Security?

Read the answers to this question and several other Social Security questions in my latest book:

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less

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Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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