The Quickstart Guide to Planning for Retirement

The secret to retiring comfortably? There is none. And anyone telling you otherwise most likely doesn’t have your best interest in mind.

Step 1

Despite what many financial pundits would have you believe, the methodologies for creating a successful retirement plan aren’t mysterious. The investment strategies we favor are practical, well-researched, and based on analysis conducted by some of the brightest minds from the likes of Harvard, Dartmouth and The University of Chicago.

Confusion about investing comes from either ignoring the long-term data, being too reactive to current events or chasing false promises of unrealistic returns (which, unfortunately, happens quite often). Combining sensible investment strategies with a strong savings plan and sound retirement planning strategies offers retirees the best chance of achieving their goals.

In this guide, we'll summarize the key components of how to begin preparing for retirement. While reading its contents will in no way make you an expert, it is our hope you will feel much more confident in the retirement planning process moving forward.


How to Strategize a Good Retirement Plan

Step 1:

Partner with Trustworthy Advisors

First things first: Every goal requires a plan. The larger the goal, the more detailed your plan of action will need to be. For example, say you're running your first marathon. Would you just wing it? Running a little bit every day, hoping you’ll feel adequately prepared to run 26.2 miles the day of the race? Probably not! That actually sounds quite terrifying.

Most likely, you would consult with an expert—someone who lives and breathes running. Someone who could advise you on exactly how to train, potential pitfalls to watch for, and ideal progress benchmarks to measure so you’ll feel relaxed the day of the race.

Planning for retirement is no different. Your first step involves partnering with an experienced advisor who can work with you to create a customized plan. Since no two individuals are exactly alike, it is unlikely the plan that works for your neighbor will work for you.

A good advisor will seek to understand your unique goals and temperament before making any recommendations. While there are plenty of criteria to evaluate when choosing an advisor (we’ll review this in more detail toward the end of the guide), here’s what to prioritize:

1. Clear Communication: The best advisors don’t confuse their clients with industry jargon. They listen carefully, speak candidly, and explain complex concepts with ease. They also won't limit their communication to quarterly reports and will remain easily accessible to answer any questions that arise.

2. Fiduciary Responsibility: Did you know that about 75 percent of financial advisors maintain no fiduciary responsibility toward their clients? That means they are NOT required by law to act within your best interest at all times. A lot of investors are shocked when they first hear this, but it’s simply the reality of how many large investment firms are structured.

3. Personal Connection: Finally, choose an advisor who shares similar values, interests, and priorities as yourself. Put simply, you should feel comfortable calling up your advisor and asking them for advice on a wide range of topics. You want this to be a lifelong relationship, so choose wisely.

Step 2:

Commit to An Investment Approach Backed By Evidence

Have you ever heard the expression “Don’t reinvent the wheel?” Well, the same philosophy could be applied to modern investing. The documented historical returns contain much useful information – though past performance is never a guarantee of future returns, studying it can provide a more comprehensive framework for future decision-making.

If you’re assuming everyone must be following the data, you would be mistaken. Retail investors commonly chase “hot returns” in spite of contrary evidence. The sad part is trying to beat the market with original stock picks rarely ends well. There’s just too much data against the practice for future retirees to justify such gambles. Which is why we recommend a pragmatic and research-driven approach:

Practice Evidence-Based Investing

Evidence-Based Investing (EBI) is the practice of making investment decisions based on more than 90 years of market, academic and peer-reviewed research. Though no one can predict the market's movements, there is some confidence in what can be achieved by analyzing what has and has not worked in the past (nationally and globally).

Conversely, EBI can be thought of as investing with what the markets give, instead of trying to outsmart it. Other components of EBI include:

  • Keeping expenses low and making tax efficient decisions;
  • Ignoring the fads and following the evidence, while strategically balancing risks; and
  • Regularly monitoring and evaluating investment selections to ensure you’re on track.
  • Staying diversified to lessen risks of over-exposure to a handful or stocks, sectors or countries

Practice Portfolio Diversification

Practicing portfolio diversification begins with understanding Modern Portfolio Theory. MPT is the key to maximizing return without taking more risk than need be. Introduced in the early 1950s by Noble-Prize winning economist Harry Markowitz, the mathematical framework assembles portfolio assets in such a way that allows potentially profitable risk-taking without compromising the volatility of a portfolio as a whole.

The key is buying non-correlated assets that don't move in tandem. One may move up, while the other one stays in place. By structuring your portfolio in this manner, you'll reduce volatility while still receiving the benefit of returns.

Step 3:

Clarify Your Retirement Goals

Once you've chosen your advisor and committed to an evidence-based approach, you're ready to begin clarifying your goals. While everyone can (in theory) make the same moves and get the same results, those results won't work for everyone. The steps you take will depend on your answers to the following:

When do you want to retire? In 10 years? 20 years?

How long will your retirement last? We know, it's a strange question to try and answer.

What do you want to do during your retirement? Start a second business, practice philanthropic giving, travel?

Do you want to leave a legacy behind? Giving to others is wonderful, but requires special planning.

None of these questions are easy to answer, but they are important for determining a). The specific investments and savings options that will be right for you and b). The amount of risk you will need to consider taking in order to achieve your goals.

People often say “I don’t want to risk money in the markets,” without realizing they are already taking a risk by NOT being invested in the markets – since stock markets have historically proven to grow faster than inflation over time.

For reaching long-term goals, the potential benefits of smartly investing in the long-term growth of stocks far outweigh the potential pitfalls. Keep your money in cash and you'll avoid volatility risks but lose purchasing power over time. Money sitting in a bank account historically has not outpaced inflation.

Conversely, keep too much in high-risk/high-return stocks and you might not be able to sleep at night! The right advisor can help you determine the perfect plan to match your future goals and comfort level.

Step 4:

Accurate Expense Estimation

Once you’ve identified your goals, you’re ready to begin looking at how much money they will require. Most savings goals will fall into 3 distinct categories: Personal goals, living expenses, and healthcare expenses. Let's review what you'll need to evaluate for each category:

Personal Goals: What do you actually want to do in retirement? While some individuals have life-long dreams they "can't wait" to tackle during retirement, many aren't really sure what they want to do. Take more vacations? Learn a new language? Ride that bike that's been sitting in the garage? While you may or may not know exactly what you want to do, it's important to begin thinking about it. Obviously, starting a tech company will require more money than vacationing in Mexico once a year.

Living Expenses: How much does it cost for you to live? Which of your current expenses will continue into your retirement? Food, utilities, and other basic expenses must all be carefully considered. Most people have a tendency to underestimate how much money they require. Depending on your financial situation and projected timeline, you may decide to downsize or move to a more affordable location. The bottom-line: Do your research and don't be afraid to weigh a few different scenarios.

Healthcare Expenses: How will your healthcare costs change post-retirement? Will your company health care plan still cover you in retirement? Will Medicare be enough or will you need to supplement it? Are your prescriptions covered by Medicare? Will you invest in long-term care insurance? How much should you ultimately put aside for healthcare costs? Again, none of these questions are easy to answer. But a trusted advisor can help you.

While a simple Google search will find many retirement expense calculators online that can give you a rough idea of what you will need, their abilities are limited. Large out of pocket costs for coinsurance, private nursing, and experimental procedures are not always factored. Additionally, many calculators integrate Long-Term Care insurance, whether you have it or not. Always rely on your own math with the help of an experienced advisor.

Step 5:

Maximize Savings for Retirement

Your savings are "the bread and butter" of your retirement plan. They are what provide you with the cash necessary to make investments in the first place, and their liquidity is what will supply your income throughout retirement. While Social Security is great, it won't be enough to support the continuation of a comparable lifestyle.

The dizzying amount of books, blogs, and apps continually being released on the topic of savings make it seem like rocket science, but the reality is actually quite simple. Saving is not spending money. And the longer you save, the more you'll have. And the more you have, the more you'll be able to do. With that said, everyone should be taking advantage of their company's retirement and 401k's maximum matching contributions (if applicable).

But, if you are a business owner, there a few special savings plans you should consider:

Cash-Balance Pension Plans: This plan has a high limit that allows you to put away a large amount in a year. Depending on the structure of the company, there’s the possibility of putting this in place and funding it with up to $245,000 in one year. This would be most beneficial for those who have small, profitable businesses.

Defined Benefit Plans: Defined Benefit Plans are a type of retirement plan where the benefit is defined, not the contribution. The benefit is usually a monthly benefit defined by a formula based on the employee's length of service, salary, age at retirement and other factors. Potentially large amounts can be contributed on behalf of the employee but benefit amounts are subject to limits.

SEP-IRA: SEP-IRA or Simplified Employee Pension (SEP) is a type of IRA designed for companies or self-employed individuals. It has higher contribution limits than Individual IRAs, but less complexity and costs compared to defined benefit plans.

Note: Note, while these plans can provide business owners with a substantial amount of retirement assets in a short amount of time, they are also highly complex. Partner with a financial advisor who can walk you through the options and introduce you to the appropriate professionals for information and for executing a plan.

Step 6:

Identify Your Primary Focal Point

Depending on where you are in your career, retirement may be 5, 10 or 20 years away. Whatever phase you are in will dictate your primary focal point. Identify your category below to find out more about yours.

20 Years Away (or more) — What Should I Be Focusing On?

  • Saving as much money as you comfortably can (and possibly more than what's comfortable).
  • Putting a good investment strategy into motion.
  • Paying off any credit card or remaining student debt.
  • Finding a financial advisor who can grow with you.

10 Years Away — What Should I Be Focusing On?

  • Revisiting your retirement goals and realigning investment strategies with those goals.
  • Thinking about where you want to retire (and how much it will cost).
  • Accurately monitoring and assessing living expenses.
  • Evaluating the purchase of long-term care insurance.
  • Obtaining an estimate of your Social Security benefits.
  • Obtaining an estimate of your pension plan (if applicable).
  • Setting a "time-framed goal" and trying on lifestyles.

5 Years Away — What Should I Be Focusing On?

  • Actively revisiting all of the aforementioned points from the "10 Year Mark"
  • Determining if you need to fill in any savings gaps or reevaluate timeframes.
  • Paying off your mortgage (if you haven't done so already).
  • Create a plan for healthcare during retirement.

Right Now - What Should I Be Focusing On?

  • Once you hit retirement, you should have a financial model that is annually reviewed by a financial advisor. The goal: Ensure you stay within a safe range of predicted outcomes and adjust accordingly.

How to Find the Right Financial and Investment Advisors

Now that you have a solid understanding of what goes into retirement planning, it's time to begin evaluating advisors. As previously mentioned, finding an advisor who has your best interest in mind, clearly communicates without industry jargon, and holds similar values is imperative. But here are some other factors to consider during the selection process:

Choose Services That Match Your Needs

Before signing on with anyone, make sure you know exactly what you're getting. Some financial advisors are experts in investment selection, while others only provide retirement planning, college savings planning, or life insurance assistance. By asking the right questions to determine expertise, you'll be more likely to find an advisor with the specific skills and services needed for a long-term relationship.

Understand Compensation

When evaluating advisors, one of the first questions you ask should be: How are you compensated? Understanding if the financial advisor expects to be compensated by you directly or by the products they sell is important. As previously mentioned, not all advisors are required by law to place your interests above their own. In such cases, you should be made aware of any potential conflicts of interest. As a customer, you have a right to know exactly how your advisor is being compensated and by whom. Request a breakdown of fees for all products and services offered in writing.

Evaluate Firm Affiliations

Again, many financial advisors are closely affiliated with firms who may hold their ultimate loyalty. Some questions to ask include: Are they an employee? Can they only sell or present "approved" products and investments from the firm? Can they act independently? Does the firm expect them to sell certain products? Good advisors can exist in many different business structures, but do find out if someone can act independently when making recommendations on your behalf.

Understand Legal Standards

Financial advisors operate under two standards in the industry—fiduciary and suitability. If you know the standard under which an advisor is operating, then you will know the legal accountability for the recommendations they are providing.

The Fiduciary Standard requires the advisor to put the interests of the client above their own. Fiduciaries act very much like a lawyer or doctor who is acting in your best interest.

The Suitability Standard requires that investments fit the client's investment objectives, time horizon, and experience, but are not legally bound to put the client first.

CFP®, CPA®, JD, and firms registered with the Securities and Exchange Commission as a Registered Investment Advisor (RIA) are all fiduciaries.

Review Credentials

Interestingly, there is an alphabet soup of credentials in the financial industry with a wide range of standards, testing, and skills! Here is a short description of our six preferred credentials. All meet rigorous testing requirements and are well-respected.

  1. CFP®, Certified Financial Planner - Financial planning and investment expertise
  2. CFA®, Chartered Financial Analyst - Individual security, business, and economic analysis
  3. CPA, Certified Public Accountant - Tax specialists; may also hold a PFS, Personal Financial Specialist for planning expertise
  4. CIMA®, Certified Investment Management Analyst - Security analysis for high net-worth individuals and institutions
  5. CLU®, Chartered Life Underwriter - Life Insurance; may also hold a ChFC, Chartered Financial Consultant for planning expertise
  6. JD, Juris Doctor (attorney) - Specialist in Law but many have found their way into the financial services industry

Note: Some financial advisors call themselves an RIA, but that is NOT a credential. It means their firm is registered as a legal entity called a Registered Investment Advisor. While such persons may provide helpful advice, they have not gone through the same rigorous standards as mentioned above.

Do a Background Check

Finally, though it may seem like overkill, it's within your best interest to do a background check on any advisor you are considering. Any Registered Investment Advisor firm with more than $100M in assets is regulated by the Securities and Exchange Commission (SEC), which will have a file on any complaints. Visit www.adviserinfo.sec.gov and type in the advisor's name for details.

If the RIA firm manages less than $100M in assets it will be regulated by the state in which it operates. In that case, you can visit www.nasaa.org and click on "Contact Your Regulator" to locate the state website for information.

Lastly, brokers under the Suitability Standard are regulated by the industry's self-regulatory body called the Financial Industry Regulatory Authority (FINRA). Any complaints against brokers will be found on the online BrokerCheck system.

Keep in mind, even if an advisor does have a complaint filed against them it doesn't necessarily mean you should eliminate working with them. Advisors are allowed to respond to any complaints filed against them, and those responses are posted. However, if you find multiple complaints filed against an advisor, proceed with caution.

Trust Your Intuition

Assuming you've done all your homework, it's time to trust your intuition. As previously mentioned, the advisor-client relationship is an important one. You want to partner with someone you feel comfortable talking with regarding a variety of subjects.

With that said, even if someone comes with a great recommendation, look elsewhere if they don't feel like a good fit. We live in a complex financial world where there are literally thousands of investments to choose from. Not to mention, dozens of seemingly important world events financial pundits claim will affect the market.

Having an advisor whom can reduce the informational clutter and let you know exactly what can be ignored can really put your mind at ease. In many cases, peace of mind is just a phone call or email away.

As you can see, partnering with trustworthy advisors who take the time to understand your goals is imperative to achieving your retirement goals.


Experience the peace of mind that comes from knowing, not hoping.