How to Make a Good Retirement Plan

What’s the primary reason to invest in stocks and bond? To build assets for your retirement. For some, that may be a long way away, so they focus on more short-term needs. That’s a mistake. You need a plan.

Two-thirds of Americans have no financial plan, a Northwestern Mutual survey shows. And of those who do have one, it too often is flimsy.

Some investors buy securities to show their support for a company – perhaps it’s their employer – and others buy securities to generate income from interest and dividends. Not the best ideas.

Loads of Enron employees had most of their net worth tied up in stock of the ill-fated energy company. When Enron went bust, so did their wealth. And while using dividends and interest as an income supplement during your working years has appeal, the better course is to re-invest them in buying more stocks and bonds, or the mutual funds that own these securities.

Fortunately, a lot of folks want to make investments today that will help them have a greater amount of assets later down the road when they retire. Americans had $23 trillion in retirement accounts at the end of 2013, according to the Investment Company Institute.

In other words, people invest primarily to build a retirement nest egg. That is what we at our firm call the journey. You save today so you can spend tomorrow.

Even though that is an easy concept to understand, many people get distracted with the snapshot rather than the journey. They lose our focus and talk of events today rather than outcomes over time. With these thoughts in mind, let’s look at some strategies to help concentrate on what is important.

First, you do not get any bonus points because you caught the exact top or bottom in the market. Mere mortals can’t predict what is going to happen – no one knows how to time the market.

Second, a stock that appears hot often is not, or soon will cool. You do not get a special gold star on your monthly brokerage statement for buying King Digital’s initial public offering, the very second it started trading. Video game maker King Digital Entertainment (KING) created a lot of buzz in advance of its IPO on the wings of its popular Candy Crush game.

The glowing prospects for these glamorous shares can be fun to talk about with friends at the coffee shop, but the shine sometimes wears off. Candy Crush’s popularity waned as the IPO neared, and it had a bad debut, dropping 16% the first day. King Digital’s stock fell almost 40% in the weeks after it started trading in March, though since rebounded to about half that loss.

Retirement planning is about goals. The old expression comes to mind: Any road will get you there if you don’t know where you are going. Figuring out goals is not simple. ING, the Dutch financial services giant, has a TV commercial with people carrying around large orange numbers showing how much they each need in retirement.

But a retirement plan is tougher to do than coming up with a single number. Retirement is personal, based on your life, not averages.

Everyone’s circumstances are different. Concocting an exact number for how much you’ll need in 20 years – one that will then last another 20 years or longer – is impossible to do with exact certainty. Objectives change, the economy changes, taxes change and so do your expectations for retirement.

Retirement planning is not a crapshoot. You must have an idea of the direction you want to go and move deliberately toward it. Why, where and how you invest should be to help meet your goals for retirement. It’s literally that simple.

How much money will you need to live decently? How will your lifestyle change? What are the odds your investments will last for your entire life? And always revise your plan as time goes by.

Don’t forget to consider tax implications of your retirement income. That is perhaps the biggest mistake we have witnessed over the past 15 years of planning. Often, it not how much you saved, but where you saved it, both in terms of returns and taxation.

Start as early as you can. Be investment and tax diversified, meaning tax deferred, tax free and taxable accounts are funded conscientiously and ready to use. Be diligent and focused. You aren’t likely to hit the lottery, inherit a windfall fortune or buy the once-in-a-lifetime investment, so there is simply no reason to leave your future up to chance.

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Written by Joseph “Big Joe” Clark, CFP, who is the managing partner of the Financial Enhancement Group LLC, an SEC Registered Investment Advisory firm in Indiana. He teaches financial planning at Purdue University and is the host of Consider This with Big Joe Clark, found on WQME and iTunes. He is a Registered Principal offering Securities and Registered Investment Advisory Services through World Equity Group, Inc, member FINRA/SIPC. Big Joe can be reached at, or (765) 640-1524. Follow him on Twitter at @Big Joe Clark and on Facebook at

Securities offered through and by World Equity Group Inc. Member FINRA/SIPC. Advisory services can be offered by the Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.

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