“Our mind is dyed with the color of our thoughts”--unknown. If this is true, then how are you thinking about retirement in the right way? To have confidence in your retirement plan you need to be thinking about the things that you can control and focusing on what has the biggest impact on your life. 

On this episode of Retirement Answer Man, you’ll learn how to create a feasible retirement strategy by analyzing your goals against where you are now. You’ll then learn about the three types of capital and how to build a net worth statement so that you can create a retirement plan of record. You won’t want to miss this important stage in developing your retirement plan, so press play now. 

Contrast your goal with where you are now 

According to the latest goal-setting research, merely setting goals alone isn’t that empowering. It is important to cast your vision; however, you also need to contrast your goal with your current state of affairs. This way you can see where the gaps lie. These gaps may make you uncomfortable, but acknowledging the incongruency will help you understand how far you need to go to reach your goals. This way you can also start collecting the little wins that inch you closer to your goals. 

The 3 types of capital to fund your retirement 

To create a feasible plan of record, you have to examine the resources that you have to fund your spending. To do this, you need to understand the different types of capital available to you in retirement. 

The first resource to consider is your social capital. Social capital is the payments you receive from a collective program like Social Security or a pension. These are guaranteed payments for the rest of your life. You’ll need to have a good estimate of what those payments are and when they start.

Human capital is next. You may not realize it, but you have used human capital as your primary resource for your entire working life. Human capital is the work you use to create income. 

Traditionally in retirement, this resource is absent, but many people now choose to work differently during, what I call, pretirement. You may choose to do a bit of consulting, open a small business, or do some part-time work for a few years. No matter how small the income may be, include it in your plan of record. Project when will it start, when will it end, how much you plan to make. 

Whatever human capital and social capital don’t pay for has to come from your financial capital. Your financial capital is simply your money. You will need financial capital to fill the gap between your retirement goals and your projected income. 

You can gain a better understanding of your financial capital by creating a net worth statement. Make sure you’re signed up for this week’s 6 Shot Saturday newsletter to receive a net worth statement template that you can use to create your own. 

How to know whether your plan is feasible

To understand whether your plan is feasible you’ll need to create your net worth statement by listing your assets and your liabilities. Even if you have no debt, you’ll want to list your future consumption as a liability to understand how your assets and liabilities balance out. By comparing both sides of the net worth statement you’ll understand your fundedness level. 

Listen in to hear how I use two ways to calculate fundedness to see whether a financial plan is feasible. On next week’s episode, you'll learn how to make your plan resilient, so make sure to check it out.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

• [3:38] Contrast your ideal retirement with your current situation
• 6:35] How to create a feasible plan of record
• [14:28] Your assumptions will be incorrect
• [18:03] How to know whether your plan is feasible
• [28:20] What does feasible mean?

LISTENER QUESTIONS

• [30:10] Jim’s question on Social Security
• [34:05] Moving from a balanced fund to a stable value fund
• [38:30] Mark’s question about using I bonds in bond ladders

TODAY’S SMART SPRINT SEGMENT

• [41:52] Take baby steps to create micro wins

Resources Mentioned In This Episode

Social Security detailed calculator

LTCI Partners

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center