When you try to overcomplicate financial matters, it’s easy to become overwhelmed and unsure of the right way forward. That’s why we’re going back to the basics of financial planning and looking at two of the most common questions that we get asked as advisors: Will I be OK? And what rate of return do I need?

Whether you’re already retired or nearing retirement, these two basic questions need to be answered. In our experience, it takes away a lot of financial uncertainty.

Question 1: Will I Be OK?

For most people, this question means: Am I going to have enough income to last for the rest of my life? For others who are perhaps more well-off, it means: Will my money support my lifestyle?

There’s a little subtlety in there, which is that those questions are looking for basically the same answer. At the end of the day, people want to know: Will I be able to generate income from my savings, investments, etc., to maintain the lifestyle that I want? Can I reach those goals?

Question 2: What Rate of Return Do I Need?

Any projection of several years assumes a certain rate of return. Does it assume 0%, 4%, or 8%? Do you need 12%? If you need 12% to be OK, you’ve got a problem. You may have to dial back your expectations. It’s very hard to get 12% over a long period of time, and you may run out of money. This can be especially true when your emotions get in the way during times of market uncertainty.

We help people answer these two questions all the time. Our income projections can help show you if you have enough money to retire. We base it on a certain rate of return to last for the rest of your life. Again, pick up on the second part of that question. If an advisor tells you that you’re going to be OK, what rate of return are they assuming for that to be true?

How Johnson Brunetti Helps Answer These Questions

When we conduct an income analysis, we take you through:

• What rate of return you’ll need
• If you have saved enough money or not
• What could happen when the market is volatile
• What could happen if we put all your money into long-term investments

Think About Your Situation and Income Plan

It’s important to ask yourself whether you’ll be OK based on the money you’ve saved, your future income, and the impact of inflation. A solid income plan will factor in all these considerations and more. If you can answer “yes” to that question, then ask yourself what rate of return you’ll need.

A good financial advisor will tailor your investments to this rate of return. Instead of obsessing over what investments you have, they’ll help you see the bigger picture.

Different Rates of Return

If we conduct this analysis and find out a client only needs a 4% rate of return while another client needs an 8% rate, their investment strategies will be very different. One client doesn’t have to take nearly as much risk as the other. If you’re counting on that 8% rate of return, you might outlive your money. Or maybe we need to have a very tough conversation about ways to modify spending.

If You Haven’t Had These Two Questions Answered…

The advisors at Johnson Brunetti can help you go through this exercise. The goal is to leave your meeting with confidence and less fear than you came in with. However, keep in mind that it’s hard to have 100% guaranteed certainty.

Although some of this has been basic, even the smartest people mess this up because they overcomplicate things. They start focusing on the wrong things, especially when times are uncertain.

We can help you answer your questions. Request your free visit with one of our financial advisors today to get started. In all this confusion that’s going on – the uncertainty, the noise in the media, and the different information coming from various sources – you’ve got to find a way to clarify things. I would suggest you go back to the basics and make sure you’ve got these two retirement questions answered.

If you liked this topic, but aren’t ready to request a complimentary visit just yet, attend one of our free educational workshops to learn some of these concepts in-person at a location near you.