Determining Your Retirement Goals

Determining your retirement goals comes after the previous steps of analyzing cash flow statement and balance sheet. I like to start by talking to my clients about their visions of retirement, their goals, and their values. Picture a day in retirement. Will it involve pure leisure and hobbies, or maybe some volunteer work, consulting, or a part-time job? Where will you live during retirement? Do you plan to leave money to your kids?

Goals are essential for success in any field. If clear and realistic goals are identified, the behaviors that lead to their realization can be triggered. This applies equally to successful retirement planning. without goals, activity lacks coherent direction, energy and resources are dissipated, and underachievement is the result. With clear reasonable goals, plans can be made, energy and resources can be focused and directed, and progress can be measured over time.

Make goals specific

Financial goals must be expressed in specific terms with clear time horizons. For example, Joe and Jill Smith want to “help all of their grandchildren with college expenses.” This goal is not sufficiently specific. How many grandchildren will be helped? One? Ten? What dollar amounts are intended? $3,000 per child? $10,000 per child? When or in what years will that financial help be needed? Here are examples of specific retirement goals:

wife to retire at age 67, husband to retire at age 65
accumulate savings and investment assets worth $530,000 in 15 years
provide $45,000 (in today’s dollars) for educational expenses for my daughter when she enters college 10 years from now

Prioritize goals

Financial goals must also be prioritized since there may be insufficient resources to accomplish all of them. For example, rank order all financial goals so that the basics of normal living (or foundation goals) have first priority. These goals can be thought of as essential “needs.” Lifestyle or discretionary goals (those that go beyond the essentials of a normal life, such as summer homes, retirement, travel, and college funding) are generally considered “wants”and fall into line only after foundation goals are satisfied. Foundation goals, provide for food, shelter, and clothing; financial emergencies; and insurance coverage; from the base of the client’s goals. Lifestyle goals are added to the extent that resources are available.