Path to Robust Retirement! Does Your Retirement Plan Need a Checkup?

Original Report: Jan. 5, 2019; Revised Report: Dec. 10, 2019.

Most likely, you rang in the new year by celebrating hope, forgiveness, second chances, and fresh start, among others. And, you promisingly set the 2019 New Year's resolutions, knowing full well that achieving these aspirations is a daunting task. You fear failing again given the earlier attempts.

Nonetheless, you can cheerfully challenge the assumptions that made such feat feels insurmountable, e.g., lack of willpower. Evidence shows that you have not succeeded thus far - not because of willpower but because of overlooking the right goals. After all, Traversing the Right Path will take us to the Right Destiny.

Right time for Right goals? The New Year holiday is not necessarily a collective time for setting goals. As an arbitrary resetting date, the New Year's eve is a convenient time to discuss savings and retirement plans with oneself and family. It is an opportunity to reassess where you are in this stage of your life. And, why not? We are always assessing events by assigning opportunity costs (albeit, subliminally) to our actions.

Possibilities? Right Mental Framework: Being honest with yourself about setting realistic goals will take you much further. With the right mental setting about what to achieve, change, or quit, you are more likely take "practical steps" within each goal for optimal success.

First of all, you could "re-evaluate your sense of time (Salam, 2019). The next period of your life is no longer a sprint, but rather a long-distance race. With advances in medical care, individuals are more likely "to remain healthy into their 80s and 90s, and beyond (Salam, 2019). In such case, you might have to reinvent yourself into your retirement plan.

Next, you could assess your internal reward/risk system about whether you want to change yourself. At the core of every resolution are habits - good and bad ones. However, it is important to know that "habits are not a finish line to be crossed," but "they're are a lifestyle to be lived." Here are science-based strategies for ensuring the success of establishing and executing plans (Shain, 2019):

Embrace snappy rewards: For habits to abide, it must have immediate rewards. The most effective rewards are intrinsic. These are the sentimental ones, not the procured ones. Naming the payoff will help build positive associations with the activity (Shain, 2019).

Prime your environment: We humans are weak. Which means environment design is our "best lever" for improving habits. To save more money, it is best to unfollow retailers' social media accounts or watch less TV (Shain, 2019).

Plan to fail: Failing is part of the process, despite one's best intentions. The question isn't "Are you going to be able to avoid that"" but whether "What are you going to do next?" It is more valuable if one have a recovery plan, or if one can learn from failure, as one is "much more likely to succeed" in your goal (Shain, 2019).

Stay positive but realistic: Too much positive thinking is a contraindication for internal support. Studies have shown that we tend to rate our resolutions and goals based on feelings. As such, we have the tendency to use the "subjective optimism," rather than the "objective & measurable" achievement rating scale. Certainly, it is important to maintain a positive & optimistic demeanor while achieving the right goals.

Regain Energy: One must also be "deliberate & specific" about carving time to decompress. You become more inspired (in turn more productive) about your 2019 resolution during the recovery & recuperation time (Rahman, 2018).

"The authentic pride, along with hope, social connection, and compassion, are the most effective emotions for a long-lasting behavior change," according to the health psychologist Kelly McGonigal. "The least effective ones are shame, guilt, and fear," she adds (Shain, 2019). By setting your goals to fit your beliefs, you might regain control of both your professional and personal life (Wong, 2018).

Approach for Solid Retirement Plan: So, it is a new year; most of us have made resolutions to get in motion our retirement plan with specific time-sensitive milestones (goals). While these intentions are great, we must formulate first a plan to achieve your overarching goal. To get there, the plan will involve smaller goals. As expected, this point is where we all fail (Kohls, 2019).

Lack of Planning: Lack of planning is one reason we fail in our retirement resolutions. "If you fail to plan, you plan to fail" is a quote that still rings true. So, if we don't plan to change, how can we expect to accomplish our goal? More likely, we don't ever think why we are making these resolutions? "Is it because we want to change or because society pressures us to change? Therefore, making unreasonable, unattainable or non-specific goals are also reasons we do not accomplish our goals" (Kohls, 2019).

Create Retirement Goals: Prior to creating and implementing goals, it is important first to assess any arresting mental barriers. Here, you will need a two-prong strategy. The first part is to reduce your fear response of not reaching your goals. You will need to identify the kind of attachment that is holding you back. From there, you might take the necessary steps to address it (Saunders, 2018).

Once you find yourself into the mental zone of goal-settings, you ask "How do you create a goal that you can accomplish? This is where you will find yourself moving into the second part of the strategy. The second part is to adopt the right framework for reaching your goals that are smart. Most planners are familiar with the SMART goal setting methods. The acronym stands for (Specific, Measurable, Achievable/Attainable, Realistic/Relevant, and Time-bound (Kohls, 2019). In addition to SMART goals, some planners may also be familiar with  the ACID Test - A different type of goals  ("Leaders with a Mentor Mindset set different types of goals in addition to S.M.A.R.T.goals.

Most achievers are familiar with SMART goals (Specific-Measurable-Actionable/Attainable - Realistic/Relevant - Time Bound).

If you follow me, you may also be familiar with your SMART goals needing to pass your ACID Test (Aligned - Capacity - Inspired - Determined).

When it comes to goal setting there are two major categories. There are means goals that lead to ends goals.

SMART goals may seem like types of ends goals; they are actually means goals.

Increasing income from $100K to $250K in 2020 is a means goal. Losing 15 pounds in 90 days is a means goal not an end goal. There are means goals within these examples of means goals. i.e., Work out 90 minutes 4-5 X per week is a means within means goal. Drinking more water and cutting out sugar are means within means. Making more dials and seeing more people, or getting a designation are means within means.

An ends goal is the vacuum that pulls you through adversity, broadens your resourcefulness, increases your capacity, and makes you more determined to succeed. The three collective types of ends goals are:

• Experiences - What are the experiences that achieving more money or losing weight will avail to you in your life? What relationships have come about as a result? What
• Growth - How will you grow or expand as a result of hitting your SMART goal? What did you learn? Who have you become? What is your new way or practice?
• Contribution - What impact have you made in your community or on the world? How are lives better as a result of you achieving your goals? How have you moved from success to significance?

This year when you are setting your goals for next year and the next decade, be sure to take your goals all the way to the ends (MacDonald, 2019).

Specific means goals should answer the following questions: What is the goal? How often or how much? Where will it take place? Measurable gives us meaningful feedback, and holds us accountable. Attainable should answer the question "Is my goal achievable?" Realistic means the goal should be consistent with other goals. This goal should be worthwhile. Time-based represents a time frame to achieve this goal. It holds us accountable (Kohls, 2019).

Retirement Plan: Creating & maintaining a retirement plan is complicated! Therefore, it is important to start by "pondering" the kind of life to have upon retirement. It is a way to better control one's future.

First, you start the conversation with yourself and family. As your loved ones, they are the ones who would help you fulfill your life in your golden year. This is especially true, if you become their dependent, due to being mentally and/or physically incapacitated.

Next, you reach out to a capable, qualified expert in financial services. As your financial counselors, they should provide the proper advise within their fiduciary responsibility. Apart from their financial advise, they can help you with due process if needed. Many situations will surface which might call for legal as well as financial representation, not only to matters of collecting your investment back, but also to matters of qualifying for long-term health care services.

Third, you might consider (along with family & advisor) the investment objectives within the context of needs, wants, and obligations at retirement.

Fourth, you frame your retirement needs and objectives along the following dimensions:

1. Formulate your retirement plan, goals and objectives?
2. Ask your financial adviser about parameters for selecting your retirement plan?
3. Understand how to generate steady income during retirement by exploring different investment assets?
4. What is the fulfillment process within set/accepted parameters of your retirement plan?

Fifth, you plan the asset allocation (bonds, stocks, others) to fulfill your investment objectives. These should be defined along the following critical parameters, i.e, potential earnings (interest income + capital gains), accepted risks, time frame, charges, and expenses. Some investment vehicles within different assets are inherently more expensive than others.

Note: Before pursuing any further steps with the financial adviser, you might ask for a prospectus to learn about the recommended investment options (funds or annuities) and respective risks, charges, and other expenses. It is key to review carefully as the value of your prospective investment will fluctuate over time.

Different Investment Paths by Financial Advisers: All investments are considered complicated (especially the ones for long-term retirement plans). Advisers may unknowingly offer objectively but sub-par advice due to their limited experience or access to client-specific investment or financial products.

Another reason may be the adviser self-desired investment or financial products, irrelevant of client needs. In this case, financial advisers might prefer one treatment over another. e.g., individual stocks, ETFs (Exchange Traded Funds), Insurance-based solutions (annuities or life insurance).

All of these approaches offered in various combinations might fulfill your needs & obligations.

Financial Advisers & Commissions: Inherently, different investment or financial products carry different compensation fees. Expectedly, financial advisers like any other professions are influenced by their expected compensation for their recommendations.

Generally, there are two forms of compensation: either the commission-based or fee-based. In a perfect environment, fee-only might be the most advantageous for clients. Rather than different front-end or back-end fees plus commissions, the advisers will offer the proper package of investments in exchange for one set fee. More complicated is the insurance-based retirement packages which offer more immediate compensation. However, other types of investments may more compensate if held in fee-based accounts.

Note of Caution: Most financial advisers are committed to provide you with proper investment solutions within their fiduciary responsibilities. Despite this, it is important to accept the fact that not all financial advisers are as committed. Like any other professions, their advise is driven by a variety of factors, i.e., expertise, formal education, professional development, organizational & personal cultures, among others.

Obviously, it is hard to know what may influence your advisory's input & feedback. The compensation alone is not enough of a predictor of advisory's preferences or motives.

Final Note: Advisory package aside, your goal is to focus on whether the advisory's recommended action plan fits well with your life, risk tolerance, & comfort level. If unsatisfied with the realized outcomes, you might ask for feedback 1) via a quick email, and then 2) via a follow-up in person for appropriate changes (Saunders, 2018).

One quick step to begin implementing your retirement plan is through automating your savings & investments. You could use app like Stash which uses automatic transfers of money from checking account into savings or investment portfolio. A well-tested approach is to set up automatic weekly transfers of small amounts from checking or savings accounts to investment accounts - a simple, hands-off technique to invest (Pahr, 2019).

Or, you may adopt "the gold-standard of automatic saving: the employer-sponsored retirement account (401k). In such case, pre-tax dollars are deducted directly from your paycheck, both easing up the investment process and lessening your tax burden. An added benefit might be your employer matching. Often, your "employer matches a percentage of contributions" (Pahr, 2019).

References:

Advertisement, (2018, Dec. 26). Does your retirement plan need a checklist. Fidelity, NY Times, p. B3

Dunn, Pete. (2018, Dec. 26). Personal Finance: 'Right' financial adviser depends on you. USA Today, p. 4B

Kohls, Emily. (2019, Winter). Kicking off the New Year, New Day New Weigh. South Carolina Obesity Surgery Center. Vol. 8, Issue 1, p. 1

MacDonald, Machen. (2019, December 09). Achieving Decade Goals - Machen's Monday Morning Mentor Mindset. [Email]. Machen MacDonald <[email protected]>

Pahr, Kristi. (2019, Jan. 9). Here to Help: Lazy Little Ways to Save Money. NY Times, p. A3

Rahman, Nushrat. (2018, Dec. 31). Smarter Living: Lose 100 Pounds? Run 20 Miles a Week? Get Real. NY Times, p. B5 - www.nytimes.com/SLnewsletter

Salam, Maya. (2019, Jan. 6). Retiring: Equal, but Wrinkled: Fighting Age Segregation. NY Times, p. BU 5

Shain, Susan. (2019, Jan. 24). How To Crush Your Habits In the New Year. NY Times, p. Y A3

Saunders, Elizabeth Grace. (2018, Dec. 31). Smarter Living: 4 Reasons We're Frazzled at Work. NY Times, p. B5 - Identify your attachment style and take control of your time

Wong, Kathleen. (2018, Dec. 31). Tip of the Week: How to combat the back-to-work anxiety of the 'Sunday Scaries." NY Times, p. B5

Supplement Readings:

We're all stressed about retirement, https://www.dhirubhai.net/feed/news/were-all-stressed-about-retirement-3911841/