One Retirement Question, Two Different Answers: Who Should We Trust?
Married couple "Mark" (62) and "Lisa" (60) want to retire together in the next year. They shared their financial plan and their goals with two financial advisors.
One advisor said they could retire.
The other said that they should keep working.
So ... Who's right?
On today's show, we try to split the tie and help Mark and Lisa set the best course for a successful retirement.
"Mark and Lisa's" Balance Sheet
Assets
- $1.2 million in 401(k)s and IRAs
- $400,000 in brokerage accounts
- $200,000 in cash.
- $600,000 home (paid off)
- Mark's Social Security benefits
- $2,900/month at age 63
- $3,800/month at age 67
- Lisa's Social Security benefits
- $2,300/month at age 62
- $3,300/month at age 67
Spending Needs and Goals
- $100,000 per year after tax to maintain their lifestyle
- $18,000 per year in healthcare premiums until Medicare eligibility at age 65
- $15,000 per year for travel and discretionary spending for the first 15 years
The Science of Financial Planning
For the purposes of this exercise, let's assume that the two "financial advisors" whom Mark and Lisa met are operating under roughly the same standards my team at Keen Wealth uses: they're Certified Financial Planners or fiduciaries who were advising Mark and Lisa on what is best for them.
Given that Mark and Lisa's numbers are, well, numbers, it may seem confusing that two different financial advisors could come up with two different conclusions about their retirement plan. After all, if you were to deliver your financial info to the two top tax pros in your town, they'd probably both calculate the same tax bill or refund.
Comprehensive financial planning certainly involves quite a bit of number crunching. Our process at Keen Wealth includes a thorough analysis of where your numbers are right now, as well as complex computer analysis of where your numbers are likely to be in the future.
And I can imagine an advisor looking at a wealthy couple in their 60s and saying:
"If you just work another 5ish years, you'll be on Medicare. You'll save around $20,000 in health care premiums. And if you do take Social Security before full retirement age, your monthly benefits will be a little larger."
That's the scientific answer. And, for many people ... that's good advice!
The Art of Comprehensive Financial Planning
But there's also an art to how individual advisors interpret those numbers and help folks make the best decisions around retirement security.
For example, what kinds of questions did these advisors ask Mark and Lisa? Did they just focus on gathering the numbers, projecting rates of return, and weigh annual withdrawal strategies against Mark and Lisa's budget goals?
Did they also ask about:
- Job satisfaction?
- Health?
- Needs of family members?
- Favorite sports and hobbies?
- Travel goals?
- Charitable giving?
- Relocation goals?
This is where the art of comprehensive financial planning comes into play. When you know people as well as Keen Wealth knows the folks we work with, we can help you plan for all the things in life that don't show up on a balance sheet.
For Mark and Lisa, maybe paying out of pocket for health insurance is worth it so they can retire now and spend more meaningful time together. Maybe they want to see the world and join their local country club while they're still young enough and healthy enough to enjoy it.
And, if they did wait until age 65 to retire, maybe life happens. Illness, accidents, natural disasters, and family issues can all force retirement plans to change course.
Keen Wealth’s Analysis
If Mark and Lisa knew what they wanted from retirement, would they actually have the means to stop working?
When we ran our initial analysis using conservative assumptions, their plan showed a 62% probability of success. That means out of the thousands of scenarios we tested with variables like market performance and rate of return, 62% of the time they did not run out of money. Our target for a “successful” retirement is typically 75% or higher.
So why did we still suggest that retirement may be feasible? A couple of key reasons:
- Case facts only. We didn’t sit down with Mark and Lisa to discuss priorities or refine spending goals. Our analysis was based solely on the facts provided and conservative default assumptions.
- Saver habits and flexibility. From the information we had, they appear to be strong savers with significant discretionary spending built into their plan. That gives them room to adjust if needed.
- Spending patterns. Our model assumes expenses rise by 3% every year. In reality, retirees often only increase spending every few years, meaning long-term projections can look more stretched than actual experience.
To illustrate how sensitive results can be to assumptions, we also ran the plan using historical long-term market averages instead of forward-looking projected returns. That change alone raised their probability of success to 87%.
But beyond market assumptions, there are practical levers Mark and Lisa could pull to strengthen their plan if needed:
- Scale back annual spending for a few years until Medicare kicks in
- Take part-time jobs doing something enjoyable
- Trim travel or other discretionary expenses
- Review and refine their budget regularly
The bottom line: retirement success isn’t a single number. With a strong asset base, good savings habits, and flexibility in spending, Mark and Lisa have multiple paths to make retirement work — and Keen Wealth can help guide them as circumstances evolve.
The “Best” Time to Retire
If your financial planning goals are just about your numbers, then the best time to retire is ... Never!
There will always be another paycheck to cash, another, bigger number to hit.
Come meet with Keen Wealth and we'll help you see a vision of retirement that's bigger than any number, and much more fulfilling.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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