Can there be a retirement planning formula?

By: 
Adam Cufr

        For years, I’ve been on a quest to determine the optimum set of inputs to design the ideal retirement plan.
        And while the topic of formulas may not appeal to you, I hope you’re somewhat comforted that it does hold some appeal for me, a retirement planning guy. I’ve thought much about the ideal blend of guaranteed income sources, risk-based investments, risk management tools like insurance, cash, real estate income, part-time wages, gold, consumption items like cars, utilities, taxes, entertainment, and food. I mean, if we could come up with a formula, or even a choice of formulas to select from to set your retirement on algorithmic autopilot, wouldn’t that be incredible?
        If any of you have children who attended college, you’ve heard of the FAFSA form. If you’re not familiar with this subject matter, it’s an acronym-laden celebration of the insanity of college costs. It’s just nuts. That said, FAFSA, or the Free Application For Federal Student Aid, is the singular means by which you apply for financial aid with the colleges that most interest your child, up to 10 colleges. The FAFSA formula factors in income, assets, number of people in your household, GPA, and much more, in order to determine your EFC or Expected Family Contribution, toward college costs. The difference between the college’s cost and your EFC is what you might be awarded in financial aid. It’s quite a maddening process for most people, but it does get me wondering if we could create a retirement planning formula that actually works.
        Imagine this: if you select the #3 Retirement Plan Formula, you can expect to retire at age 62 with no debt, $6,000 of after-tax monthly income, a 3% cost of living adjustment each year, $80,000 of annual long term care funding with a 3% cost of living adjustment, and a $250,000 bequest to your heirs at death, with a 100% chance of success. Wouldn’t that be amazing?
        In order to accomplish this, you’d be required to save 15% of your annual income beginning at age 25, give 10% to church or charity, live in a home that cost $250,000 or less, and live on the rest. That would be your price for choosing Plan #3. It’s the ultimate set-it-and-forget-it retirement strategy – you’re a living algorithm.
        So while I fantasize about this idyllic approach to retirement planning, my daydream is interrupted by…life. The cancer diagnosis at age 48, the divorce at 52, the incredible BMW ad you saw in a magazine that sent you right to the dealership, the new iPhone you simply cannot live without, the unbelievable rise in college costs, and on and on.
        These life events are constantly wrecking my beautiful, elegant, autopilot retirement plan idea. It really does bum me out from time to time. It turns out the all-too-imperfect remedy for these human conditions is to communicate with one another about these life events so that the #3 Retirement Plan Formula you’ve chosen can be updated and adjusted to account for life stuff.
        For while I’d like to simply plan away these inevitabilities, it turns out we’re going to have to live with one another in order to ensure your plan remains on track and as effective as possible in the face of unending change and uncertainty.
        In the meantime, I’ll keep working on my formulas. Who knows, maybe there’s an ingredient I’ve overlooked that makes this all fit together elegantly. Your job then, is to decide what you really want your retirement to look like. With as much clarity as possible, describe – and put pen to paper – what you’d like to achieve in your retirement. And once you have that clarity, seek the counsel of professionals to help you translate your vision into steps, actions, and financial tools – a plan – suitable for achieving your vision.
        For without action, your vision is just a dream.

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