Keeping Score

Jalene Hahn |

Individuals as different as H. L. Hunt (Money is just a way of keeping score) and Mae West (The score never interested me, only the game) have commented on how money affected their lives. Last year, I wrote an article called This Just In: Apparently Money Can Buy Happiness in which I cited research suggesting that people with more money are happier than those with less but not necessarily in proportion to increased wealth. This is borne out through our experience with our clients. Being able to maintain a comfortable lifestyle seems to be a much greater barometer of ‘happiness’ than great wealth.


Attitudes about money often shift as people move from full-time employment to retirement and helping people make that transition is an important part of our work. We sometimes encounter those who are afraid they don’t have enough money to take that step. In fact, more than once, individuals or couples have delayed calling us, afraid the news might be bad. They didn’t want to hear us say that they needed to keep working in order to cover their expenses in retirement. Fortunately, that’s rarely the case. In fact, after nearly thirty years advising people about their investments, I can recall only a couple instances when we couldn’t find a way to make the numbers work.


Our approach to retirement finances is quite simple – we just require a balanced budget. Whether retirees keep their investment accounts and continue paying on a mortgage or reduce their account balances (or utilize a reverse mortgage) to pay it off doesn’t really matter. We just want income to cover outgo.


Does that statement beg the question of how much is required to make retirement financially feasible? Here’s a formula I developed for projecting the amount of assets necessary to maintain a retirement life-style similar to that enjoyed while working:


[(Asset Values+Contributions) x Future Growth ÷ Yearly Spending over Project Lifetime - (SS+ Pension Income)] x Inflation Adjustment


If that doesn’t seem helpful, you can do a web search for ‘Retirement Income Calculator’. When I tried it, I found over 150 million links. A list that large is probably of little value either, so here are two calculators for your consideration, both from companies we trust: first from our primary asset manager Dimensional Fund Advisors and second from the well-known Vanguard family of funds. Of course, we and other planners are available to provide a professional review of your situation should getting a more detailed answer seem like a better idea.


A frequent question is ‘How are we doing with our retirement savings?’. Well, averages certainly don’t tell the whole story but here’s a chart from the Economic Policy Institute showing the median (mid-point, not average) amount of family retirement savings by age group.


What does this tell us? That unfortunately, most families have saved very little for retirement, even those in their late 50s who should be in the best financial condition of any age group. Perhaps it also tells us that no one should be afraid to seek advice about their retirement finances.


There are several ways to resolve a lack of sufficient retirement assets. In some cases, part-time work will do the trick. Here’s a link from the Washington Post that describes several family situations in which continued earning has taken care of finances. In others, taking in a roommate, moving to a smaller dwelling – perhaps an apartment – or getting rid of a mortgage payment might be the best approach. Regardless, ignoring the issue is not going to provide you with retirement security. I have shared this riddle before but perhaps it bears repeating:


When is the best time to plant an oak tree? 50 years ago.

When is the second-best time? Today


Please take positive steps right now to ensure that your own retirement will be a comfortable one. Collect the relevant facts, make or adjust your plan based on that knowledge and consider changes to your financial behavior that will improve your results. We, of course, would be happy to help.