When Will You Retire?

This is a very popular question amongst baby boomers. However, we believe the right question to be asking is, “When will I have enough money that I do not need to work”? Surprisingly, very few Americans know the answer to either of these questions. At Ted Buchan & Company, we believe knowing the answer to these questions and having your financial house in order are two of the most important ingredients that lead to financial peace of mind.

Spending vs. Saving
We believe that everybody has a financial personality that needs to be identified. Each individual can be categorized as a spender or a saver when it is comes to handling their financial affairs. Regardless of which one you are you can still be successful financially. We begin our process identifying your financial personality.

  • Spenders tend to reach their goals when savings are automatically debited from their bank accounts and everything that is left they can spend.
  • Savers have a financial personality that lends itself to being good savers, yet they have a tendency to be risk averse. We create investment options that balance risk with reward, keeping in mind life circumstances.

The Beauty of a Budget
Americans are notoriously bad at creating and sticking to a budget! The reason people don’t like to budget is that they do not like the results once they see where they are spending their money. However, without knowing on a monthly basis how much you regularly spend, it is virtually impossible to do any type of long term planning. Our firm does not necessarily care where you spend your money, we care that you can be accountable to spending within your own plan. This allows us to model for you where you are today and where you will be down the road based on your current spending habits.

Understanding Cash Flow
Our firm uses cash flow based planning with all of our clients. Cash flow based planning illustrates your different sources of income and different expenses projected over whatever time frame you are interesting in analyzing. This type of planning very clearly illustrates where every dollar is coming from and where every dollar is being spent. Cash flow based planning lends itself beautifully to scenario planning which we use to visualize your future. Scenario planning allows us to focus on one variable and change that one variable and see what the consequences over that modification are over a period of time. We use this planning with clients to compare and contrast different planning strategies so choices can be made with less stress and more quantifiable information.

The Link Between College Planning and Retirement

A Bright Future for You and Your College Bound Student
Studies show that the peak earning year for the average American is 49 years old. This milestone happens to coincide perfectly with the average age a parent sends off their first child to college. In previous generations, this next decade proved to be the most prolific savings years for the average family as they were making the most income they had made in their lives. This prolific savings during their 50’s enabled them to catch up on their retirement savings and put themselves in a nice financial position to retire in their early 60’s.

Unfortunately for the average baby boomer this approach will not work as the cost of college has increased exponentially forcing many parents to redirect a large amount of their anticipated savings toward retirement in their 50’s toward paying for college instead. This in turn leads to them working and saving into their late 60’s before they are able to accumulate enough to be able to comfortably retire adding 5 and sometimes 10 years to their working years.

We believe planning for paying for your kids college education and funding your retirement need to be analyzed and modeled simultaneously. We illustrate to families all of the options that are potential ways to approach the college funding dilemma and provide them data points that help them make informed decisions. We try to empower families so they understand how much of college they can afford to pay for without sacrificing the retirement they want.

Comprehensive Proactive Financial Management
The other day in a meeting with a client in which I was explaining to her the various options of accomplishing her goals she blurted out “just tell me what to do”. This comment may surprise some individual’s yet at the end of the day what most people want when they hire a professional is for that individual to tell them in in their professional opinion “what they should do”. When we work with clients we want to educate you so you understand what options are available to you and how various decisions will lead to different outcomes.

When we initially finish designing and implementing a college or financial plan for a family there is typically a feeling of relief from the client knowing that at this point in time their financial house is in order. There is peace of mind for an individual knowing that they have all of their children’s college education funding mapped out and paid for and that they are on the path to a prosperous retirement. At this point we remind the client that their lives are going to continue to change and their lives will evolve and that which looks like an ideal plan today will need to be modified over time as their lives change. We let them know at this point that we do offer comprehensive proactive financial management so they can hold onto this feeling they have today and we can come alongside them on this journey and be their guide. In this type of engagement we work in ongoing capacity helping them manage their investments assets and modifying their plan along the way as their lives evolve.