Retirement vs. Distribution

by | Dec 13, 2016 | Financial Planning

There’s an excellent article written by Carl Richards featured in the NY Times. Richards is known in our industry because he comes up with cute images drawn on napkins that succintly get a message across. I’ll link to the article below.

His point was the old “image” of retirement was “work hard from 25 through age 65” and then “play a lot of golf” at age 65.

Very few people ACTUALLY do this.

What we’ve been trying to stress to our clients is to not get hung up on the actual “retirement” age. After all, we have some clients in the public safety field who retire in their late forties and early fifties.

What we’re trying to determine from our clients is this: at what age do they believe they are going to begin the “distribution” phase — that is, when will they begin drawing down their retirement account?  This helps us determine how long we can focus on growing the assets needed for distribution.

Even though a client may “retire” from their career at age 48, or age 58 or even 68 years old, they may not begin to start drawing on their funds for 7 years, 17 years, 27 years …or (hopefully) never, and leave it for their children.

When Social Security was rolled out in 1933, monthly payments began at age 65. The average life expectancy at the time was 67. That is not the case today. Measuring “life expectancy” is an inexact science. On average, people are living longer. Their retirement funds need to be stretched over many more years… more years than most people consider.

Here is the link to the article: