Coin Flip Retirement

It’s a bit mind-boggling when you realize some of the decisions that have been made based on the flipping of a coin.

• A coin toss between two brothers provided Wilbur Wright his place in the history books as the first one to fly. Had the coin landed the other way, it would have been Orville instead.
• Winning 2 out of 3 coin tosses determined the name of Portland, Oregon, which would have otherwise been Boston, Oregon. (Somehow that just doesn’t sound right!)
• Secretariat’s owner was also determined by a coin toss, or at least the right of first pick was determined by a coin toss, which ultimately determined the owner.
• While there are many things that are left to chance, I am in hopes that your financial future is not one of them. Depending on whom you ask, coin tosses have a 50/50 chance of landing either way or a 51% chance of landing heads up due to the slight difference in weight.

The question is: Do you know what your probability of “winning the coin toss” in retirement is? Do you know the probability of success or failure (running out of money) in retirement?

Unfortunately, for those who have not done any planning yet, the probability looks worse than a 50/50 coin toss. It is not at all uncommon for us to see the probability of success well below 50% when someone first meets with an advisor. What needs to happen to raise that probability to an acceptable level? Planning. It really is that simple.

Planning meets you where you are. Let’s look at just a few of the areas of planning for retirement that we regularly address:

• Do you understand your Social Security claiming options?

  • HINT: With over 2,700 claiming rules, there are way more options than the ones listed on your statement!

• Do you know how much income your household will NEED in retirement? What about how much you will WANT to do the fun things in life?

  • Most pre-retirees initially respond to these questions with a blank stare, but it plays a significant role in your retirement outcomes.

• Do you have debt that could be eliminated prior to retirement?

  • While we have seen some retire still paying student loan debt, we have also seen many retire with zero debt. No car payment! No house payment! Maybe you think that you can’t be in the debt-free group. If you move beyond leaving it to a coin toss, you really can do it with some planning and intentionality.

• Do you know HOW you will take income?

  • Most people haven’t really thought about this one prior to a discussion with a financial advisor. For decades, people add money to their retirement plans, but how do you withdraw income and make sure that you still have money in the future? There are some critical strategies that come into play, especially when there is market volatility.

• What do you know about Required Minimum Distributions and Qualified Charitable Distributions?

  • Doing them right (or wrong) can make a big difference for you in terms of taxes owed, taxes saved, and even the amount you pay in Medicare premiums.

While the results of a coin toss are basically 50/50, with the odds weighing ever so slightly in favor of heads over tails, most people don’t want to leave their retirement up to a coin toss and count on 50/50 odds. When it comes to your retirement, don’t just hope that things work out. Plan on it!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.