One of Leonardo DaVinci’s more ingenious inventions was a self-supporting bridge. This DaVinci Bridge, as it has come to be known, uses its own weight to support itself. In many ways, this is just like a well-constructed retirement income plan.
Most of the time people focus on an individual piece of the puzzle. People treat their investment portfolio, or annuities, or a bond ladder, or something else as the sole answer. But in reality, this is just a piece of their retirement income plan that they are most comfortable with.
Instead, we need to think about how all of the different pieces can fit together to support each other. Nothing in your retirement income plan should, or even can, work in isolation. Everything needs to work in harmony with all of the other areas of your plan. If done well, the whole is much greater than the sum of the parts.
There are a lot of reasons why this isolated approach to retirement income planning has taken hold, but I think at least some of the problem comes from the shift that needs to happen in your retirement income plan as you start to approach (and enter) retirement.
During most of your working years, when retirement is this amorphous idea , retirement planning is pretty simple. There are all sorts of ways that you can optimize things, but it can largely be boiled down to two things:
1. Spend less than you earn.
2. Be a disciplined investor.
There are other things that you can do (and that are worth doing), but these two points would have taken you pretty far.
However, as you start looking at transitioning to retirement, things start to get a lot more complicated. Now you need to start thinking about your Social Security claiming strategy, what you want to do about reliable income, how big of a pool do you want for your reserves, and hundreds of other things.
…And not only is retirement planning getting more complicated, the stakes are getting higher.
Earlier on in your retirement you had the time to make up for any mistakes that you made. As you approach retirement, that margin of error gets smaller and smaller. Simply put, you have to get this right on your first go around.
You need a framework for how to put your retirement income plan together so that, like DaVinci’s Bridge, each of the discrete pieces of your plan work in harmony so that they all support your plan – and you can reach the retirement that you have been planning on.
Talk to us today to find out what it actually meant for all of the different pieces of your retirement income plan to support each other and start building the healthy financial life you want!
© Bob French, CFA
Director of Investment Analysis at Retirement Researcher