We’re numbers people here at Truepoint. At any given moment, someone is reaching for a calculator, whipping up the next Excel spreadsheet, or tapping away on a 10-key. When a calculator or spreadsheet won’t do, we move on to our sophisticated software programs that help us project probabilities of lifetime goal achievement. We then analyze the numbers from this angle or that angle, considering one assumption or another. However, in the end, the numbers lead us to a plain and simple truth: some clients are well-positioned for retirement and others are not.
Our clients, as well as those of most wealth advisors, have likely experienced some degree of financial success along the way. For some, that may mean earning a high income in the prime of their working years. For others, it may mean having made a wise investment or starting a business long ago. Due to this success, few of our clients will face a grim retirement. They’ll be able to afford the essentials of food and shelter without worry, along with a few comforts.
However, how many will maintain the lifestyles to which they grew accustomed during their working years? This is a different matter entirely. And it’s an area in which we see frequent misunderstanding as we work with clients. One lifestyle during the working years doesn’t automatically lead to the same lifestyle in retirement.
This may come as a surprise, especially if clients maximized annual contributions to a retirement account like a 401(k) plan or IRA. Saving to these retirement vehicles is certainly a good start, but it is only part of the overall retirement savings equation. Often overlooked is the need to diligently save above and beyond these retirement vehicles in a taxable investment account. It’s this additional savings that boosts one’s chances of maintaining a desired lifestyle in retirement.
Why do some fall short in saving to taxable investment accounts? Because doing so requires limiting current consumption. Instead of allowing lifestyle creep to take over, it requires deliberately looking at the dollars arriving in each of our paychecks and making a conscious decision not to spend it all. It requires having faith, that with time and appropriate financial guidance, these assets will be there in the future. This takes incredible resolve.
This is where we enter as your advisors. You’ve engaged us to help you maintain this discipline, both in the management of your portfolio as well as in your financial decision-making.
What are we doing to make sure our clients stay on track? We’re placing a renewed emphasis on the family budget, regardless of income or asset level. Most clients come to us without one. In this case, we’re diving into the details – requesting bank and year-end credit card statements – quantifying as much as we can. We’re having discussions about a family’s highest priorities and identifying areas of potential excess. As a result, we’re discussing their capacity for additional savings. We’re then automating this savings via monthly electronic funds transfers from their checking accounts.
Next, we’re checking in each year, gauging clients’ progress. We discuss the spending and savings goals set in the prior year. If these goals were accomplished, we celebrate together. If they haven’t been met, we coach clients through the changes and decisions that will need to be made going forward.
These conversations aren’t always easy – for the client or the advisor. However, as fiduciaries, we’re committed to doing what is in the best interest of our clients. Sometimes that means delivering a message to clients that they need to hear, rather than what they want to hear: saving more during the working years will provide greater flexibility and security in retirement. It offers the best opportunity to continue living that desired lifestyle.
As advisors, we feel success when our clients are successful. Similarly, we feel disappointed when our clients fall short of their goals. Our hope is that you arrive at your retirement date, well-prepared for the future you’d envisioned. We’re here along the way, helping you get there.