Retirement Planning: The Financial Connection of Planning, Investments, and Cash Flow

David Staples, Financial Advisor

April 28, 2019

Three retirees enjoying time together looking at a phone in a brightly lit room

There are some life-changing decisions that people make which require a leap of faith. One of those decisions that investors are hopefully fortunate to make, is: “When do I retire?” For the past 30, 40 maybe even 50 years, you have been working hard to earn an income and to save for retirement. Retirement planning and making the shift to retirement can be a big mystery and full of anxiety.

“What will life look like?”

“Will I be OK financially?”

“How do I replace my paycheck?”

Retirement Planning Connection – Financial Planning + Investment Planning + Cash Flow Engineering

These are all questions we hear from our clients and prospective clients and we attempt to answer these questions by covering 3 very important topics: Financial Planning, Investment Planning and Cash Flow Engineering.

We believe that everyone should take the time to sit down and build a comprehensive financial plan. This is the foundation. You must understand why you have saved all these years and what you want this money to do for you during retirement.

As an Advisor, it is so rewarding to sit down and have someone speak with you about their hopes, dreams, goals, and what they want their lives to look like in retirement. Answering questions like: “How much can I afford to spend each month?” “How do I plan and pay for travel?” “Can I help pay for the education of my grandkids?” “Can I continue to give to my charities?” “How do we plan for additional healthcare costs?”

We ask questions that are important to consider and incorporate into your plan, such as: “What are you most concerned about?” “How much risk are you comfortable with?” “Do you want to leave behind a legacy?”

All these questions and many, many more are necessary in creating a unique, long term plan for anyone thinking of retirement.

Investment Planning

To use a popular analogy around our office, if the Financial Plan is the car, the Investment Plan is the Engine. It is important to make sure the car is going in the right direction (Financial Plan) but you also need to make sure you have a sound engine to get you from point A to point B.

At Salomon and Ludwin, our goal is to build an Investment Plan that complements the Financial Plan. Connecting the dots between your plan and your investments is a critical component in our process.

Cash Flow Engineering

In retirement, many clients have voiced their unease about not receiving a paycheck but still having to pay their bills. The anxiety that comes with the question, “Where does my paycheck come from?” can be solved through cash flow engineering.

You may receive social security and possibly even a pension (although this is becoming rare as companies are moving away from Pension plans). Even with different sources of income coming in to offset retirement spending, almost all retirees will need to draw from their investments to fill their income “gap”. As we develop investment plans for clients, we do so with a keen eye towards bridging that income gap.

Our goal is to create a cash flow plan that will generate 75% – 100% of your required income through fixed income sources (social security, pension, etc.), Required Minimum Distributions from retirement accounts and dividends and interest. If you can meet the majority of your income need through these sources in retirement, we believe this will lessen the pressure on your investments and allow you the ability to sell as little as possible to fill your income gap. This strategy is especially beneficial in volatile and declining markets.

Retirement Planning Next Steps

Download the free Retirement Planning Checklist to help you stay on track. These helpful tips can prepare you for the natural fears associated with retirement.

DisclosureThis information is intended for educational purposes only and should not be construed as advice. You should discuss your circumstances with a qualified financial professional prior to making any decisions.

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