Why Your Financial Plan Needs a 5 to 8 Year Cushion

Why Your Financial Plan Needs a 5-8 Year Cushion

Originally aired 2/3/2021




A recent study found there may be something you’re underestimating that could be detrimental to your retirement! What is it? Find out on this episode of the Get Ready For The Future Show!

You’ll learn:
– The two most important things in retirement
– How your plan should address them
– Valuable insight from LPL’s Chief Market Strategist, Ryan Detrick


Free 15 Minute Retirement Checkup



Will you run out of money?

  • How confident are you that your income will always be enough to sustain your lifestyle? OR
    • Have you become at all concerned that at some point during your retirement you might actually start to run out of money?
  • If you have become concerned, you’re not alone!
    • 72% of pre-retirees are worried about running out of money.
    • 64% are concerned about being unable to maintain their current lifestyle or quality of life.
      • Source: ThinkAdvisor
    • One of the biggest factors in whether or not you’ll run out of money in retirement is longevity.
    • When you think about having a long life, the first thing that comes to mind isn’t likely the problems that can come out of it.
      • And, really, longevity is overall a good thing… if you plan for it.
      • However…
  • A study by Morningstar Investment Management found that investors frequently underestimate the number of years they likely have left and may fail to plan accordingly.
    • The study found that even those who feel they’ll be around for 20 or 30 years after retirement may be underestimating their own longevity — and thus not funding their golden years appropriately.
      • Individuals who estimated that they had no chance of living to 75 actually had about a 50% chance of reaching that age.
      • On the other hand, respondents who said their odds of reaching 75 were 100% actually only had about an 80% chance.
    • Financially speaking, retirement is essentially an income
      • You don’t want to run out of money before you run out of time

Interview: Ryan Detrick

  • I

The two most important things in retirement

  • The two most important things in retirement are dignity and independence.
    • These must be purchased every day with your retirement income.
  • So, how do you overcome the fear and protect your dignity and independence?
    • You plan!
  • A plan is not:
    • Just investments.
    • Just Social Security.
    • Money stashed away in savings.
    • Hoping that it all works out.
  • Traditionally, financial advisors have been focused only on investment management.
    • When a client reaches retirement, they can be largely on their own figuring out how to take their managed investments and turn it into an income stream.
    • How do you decide what investments to sell, how much, and when?
  • There are no perfect investment products. Planning doesn’t assure success, but it provides a framework for investments, strategy, and protection.
    • The whole point of a plan is to give you options. Flexibility. We’d say hope, but fact is, you don’t need hope when you have a plan.
    • If your plan only focuses on investment management and leaves strategy and protection up to you, it’s time to get another opinion.
  • The Morningsar report’s author wrote, “Retirement periods should be personalized for each client in a financial plan, based on that client’s facts and circumstances, considering various attributes such as years until retirement, income, health status, smoker status, and so on.”
    • Having a strategy-based approach is vital to dealing with longevity risk.
      • The GenWealth Difference is that we are Education-Driven, Strategy-Based, and Team Delivered.

A strategy-based approach to longevity risk

  • Your life expectancy, your goals, your lifestyle… all of these are likely different for you than the next person who walks through our door.
  • Through the GenWealth Ready to Retire Process, you get a personalized plan on paper, on purpose.
    • Your financial plan doesn’t look like anyone else’s.
    • It’s not something we pull from a shelf; it’s the result of conversation and collaboration.
  • We address longevity risk with this strategy:
    • House Analogy
      • Foundation – Gap Analysis
        • Annuities?
      • Living
      • Legacy
    • Drawing income from relatively low-risk assets while allowing time for equity investments to potentially grow.
    • Ready to Retire Process – IFLM
    • Buckets
    • According to the extensive report we’ve mentioned throughout the show:
      • Simulations suggest adding five years to the life expectancy estimate for a single household, and eight years to the longest life expectancy of either member of a joint household (or to each member if separate end ages are used for spouses), at the assumed retirement age, is a reasonable approach to approximating the retirement period.
    • The role of your advisor is to consider all the circumstances surrounding retirement and help you plan accordingly.


    • Even those who feel they’ll be around for 20 or 30 years after retirement may be underestimating their own longevity — and thus not funding their golden years appropriately.
      • Talk with your advisor about your specific circumstances to determine what your plan should focus on!
    • Your plan should be personalized for you.
      • You are unique. Your circumstances are unique. That means your financial plan should be, too.
    • Are you on track for a successful retirement?