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Retirement Planning Roadmap (Also, Two Books Updated for 2018)

A quick bit of news for today: the 2018 editions of my book about sole proprietor taxes and my LLC vs. S-Corp vs. C-Corp book are now available. Each book now reflects the new 2018 tax law (including the new deduction for pass-through business income, among other things).

So, of the six books that needed updates to reflect 2018 tax law, five are now finished. (Can I Retire? is the one that is still in the works.)

I recently came across a new publication from Vanguard Research, which they are calling their “Roadmap to Financial Security.” In short, it’s a how-to guide to actually creating a retirement plan.

If you’re working with a financial planner for your retirement planning, presumably they have a process of their own. But for people taking a DIY approach to retirement planning, Vanguard’s paper does a good job of laying out an explicit process for creating a plan.

Specifically, it’s a four-step process, with an aim at achieving financial security, which they define as “the peace of mind that results when retirees feel confident that they will attain all of their financial goals and be able to continue doing so in the future.”

Step one is to determine retirement goals. They make a point of noting that for most people there’s not a single goal of “retirement,” but rather four separate categories of goals — basic living expenses, contingency reserve, discretionary expenses, and legacy funding — the magnitude and importance of which will vary from one person to another.

Step two is to understand the risks. They describe five major risk categories: market risk, health risk, longevity and mortality risk, event risk (i.e., major unplanned expenses), and tax and policy risk. Again, the significance of each will vary from one person to another — as will the solutions selected to manage those risks.

Step three is to assess the available financial resources, such as guaranteed income (e.g., pension, Social Security, lifetime annuity), liquid assets, and other resources (e.g., insurance, home equity, work).

And step four is to develop a plan to achieve goals and mitigate risks. This is the step where you bring everything together (i.e., where you actually determine how to deploy those resources to best achieve your goals in the face of the relevant risks).

I like it. It’s nothing fancy (and nothing super detailed), but it’s clear and easy to follow. You’re essentially building a retirement balance sheet. On one side you have the liabilities that you will have to fund (i.e., the goals you intend to pay for). On the other side, you have your financial resources. And you take the time to consider risks — both risks to those resources as well as risks that might increase the size of the liabilities.

Retiring Soon? Pick Up a Copy of My Book:

Can I Retire Cover

Can I Retire? Managing a Retirement Portfolio Explained in 100 Pages or Less

Topics Covered in the Book:
  • How to calculate how much you’ll need saved before you can retire,
  • How to minimize the risk of outliving your money,
  • How to choose which accounts (Roth vs. traditional IRA vs. taxable) to withdraw from each year,
  • Click here to see the full list.

A Testimonial from a Reader on Amazon:

"Hands down the best overview of what it takes to truly retire that I've ever read. In jargon free English, this gem of a book nails the key issues."
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My new Social Security calculator (beta): Open Social Security