Have you ever watched the movie The Candidate? Robert Redford stars as a candidate with no chance to win. As a result, he runs an anti-establishment campaign… and wins! (Sound vaguely familiar?)
Well, the best part of the movie was the closing line. Redford’s character, who spent the entire movie with the single focus of winning, pulls aside his consultant (played by Peter Boyle) and plaintively asks, “What do we do now?”
After interviewing Wade Pfau (see “Exclusive Interview with Wade Pfau: Distribution Strategy Just as Important as Savings,” FiduciaryNews.com, January 18, 2016), I can see Redford’s line might play as well in the retirement industry as it does in politics. Pfau outlined several spending strategies which retirees might choose to implement. He also cited the risks of several of them, including the subject of his latest book: reverse mortgages.
It was his line about the biggest challenge facing retirement plan fiduciaries that got me thinking of The Candidate. We spend a lot of time and energy trying to get people to focus on savings, and for good reasons. Article after article has been written describing how little is saved in the average retirement account (not to mention how many people don’t have anything at all saved for retirement).
I’ve written about how some of these statistics skew reality. In fact, it should be immediately obvious that “no income” people don’t need to save for retirement because they have no need to replace income because they have no income to be replaced.
But I’m not talking about this extreme side of the spectrum. I’m referring to the vast middle. Well, maybe the vast slightly upper part of the middle. These are the people well aware of retirement savings strategies and very focused on implementing them. The concern may be that they’re too focused on the savings part of the equation.
This overemphasis on one factor in the financial picture tilts all things in a way that can warp reality.
Perhaps a better example might be the often exaggerated focus on tax avoidance. It’s not unusual for a CPA to insist that a client, say, place money in a traditional IRA in order to reduce the current year’s tax liability.
If we do the tax math, however, in many cases it’s better for someone to forgo saving taxes this year in order to save more taxes in later years. In our example, that would mean placing money in a ROTH IRA, not a traditional IRA.
Is it possible some people may be pushing the envelope when it comes to saving for retirement?
It’s not a matter of saving too much. I’m not sure it’s possible to save too much (within reason, I realize you can create a situation where you starve yourself today in hope of feasting tomorrow, but leave this severe condition aside for the moment).
If all we’re concerned about is saving for retirement, is it not possible to save in a way that constrains spending during our retirement years?
That’s why Pfau reviews the multiple spending strategies and suggests the retirement savings plan must in some way integrate the eventual spending plan.
Otherwise, when the time comes for retirement savers to collect their gold watches, they might look up at you and ask “What do we do now?”
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
