Retirement Requires a Solid Plan and Practice

Posted by Prospera Financial on May 14, 2024

“Everybody has a plan until they get punched in the face.” – Mike Tyson, former heavyweight champion boxer.

Financial planning conversations with clients are designed to help them gain perspective on how the variability of market returns could affect their ability to meet or exceed their future spending goals, in retirement or otherwise. When an experienced advisor conducts the conversation, clients prepare a plan of action for market downturns and how to react with minimal emotion.

Sounds like a solid approach, right? Yet when markets “punch us in the face,” clients find it difficult to stick to the plan and not overreact to the moment. It’s a human emotion that is hard to predict and even more difficult to control.

Whatever one is trying to accomplish in life, success depends not only on a well-thought-out plan but plenty of practice and repetition. This is where financial planning excels and provides tremendous value to investors. Regular conversations that update the plan and revisit possible scenarios of market downturns are critical to minimizing emotions and staying the course.

When negative market returns reduce the investor’s confidence (as measured by the lower probability of successful outcomes), the investor has many “levers” to choose from to adjust the plan and increase confidence. The choices readily available for most investors are to retire later, reduce some retirement spending, or save more before retirement.

Conversely, when positive market returns increase the confidence of the investor (as measured by a higher probability of successful outcomes), the investor can choose to retire earlier than planned, reduce portfolio risk by adjusting their asset allocation, or add some “ideal” spending goals now or in retirement that may have been sacrificed in the original version of the financial plan.

Financial planning conversations focused on the client’s goals and dreams, supported by consistent updates and references back to the plan, create a deep, trusting relationship with clients that can increase the chances for a successful retirement outcome. Start (and continue) one today!

Until next time,

Ken Manning
Director of Platform Solutions

Posted by Prospera Financial