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Repairing a Retirement Plan

Forces beyond your control of any one person can send your hard-earned retirement up in smoke, as so many saw in the 2008 financial crisis. How can you repair the damage? One couple’s story shows how this can work.

When Karen and Charlie first approached my firm in late 2008 for an appointment, they were scared. Their portfolio dropped significantly in the stock crash and their plans to retire within two years seemed impossible. They lived modestly and did a great job saving throughout their working years. Karen had a pension that enhanced what seemed to be a pretty good holdings – until the financial crisis hit.

We met in mid January 2009 and they decided to engage our financial planning services. While we were developing their plan, the markets further hammered their portfolio. By the time we completed the initial planning work in April the markets already hit bottom and began to recover. But could they still retire on schedule?

We defined and prioritized their goals and laid out how their assets should recover. Our projections showed Karen and Charlie that retirement was still possible on the schedule they imagined.

The pair never owned their own home. A critical goal for their retirement was to purchase a house. They were scared because of the shock they just endured, but diligent planning gave them the confidence and assurance that they could do all of this on their original schedule. Without a clear plan, they might have waited longer to purchase a home at a less attractive price.

After the shock of the 2008-09 downturn, the urge is to unload stocks and flee for safety. Essentially, we had them stay with a strong commitment to stocks, since equities historically rebound and are the best chance of growing wealth. The market indeed came back and so did their firm financial standing.

An important part of the process of financial planning is educating clients to show them their options. We ask how a plan changes if the client works one more year than planned, or one fewer year, for example. We run the numbers and see whether that puts the plan in danger. Sometimes, without expert help, you don’t know which questions to ask yourself, and you make less than ideal decisions.

After discussing these options, Karen and Charlie were able to make an educated decision about the timing of their new house purchase and the date of their retirement.

The couple was also concerned that they had not devoted enough time, energy, and attention to managing their personal finances. To ensure that they continue to make good decisions, they retained us to work with them into the future, checking on their progress and suggesting refinements.

Today, they are happily retired in their dream home, in the town they had planned to retire in all along. They have the confidence thanks to a systematic and coherent approach to their finances. Thanks to guidance and planning, they can do what they please rather than worry when the markets fluctuate a little. They know that they have a written, disciplined approach to their financial lives to serve them as they live out their dreams.

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