Is Your Retirement Plan Full Of Swiss Cheese?


Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder oXYGen Financial, Inc.

Request a FREE consultation: www.oxygenfinancial.net


Last year, I did a piece on retirement planning assumptions. As I continue to see more and more plans done by other financial advisory firms, I become more concerned about consumers. Most projections that are done in business or I your personal household need to carry assumptions. These are the variables in the equation that allow to make a reasonable assessment about what needs to be done when you are trying to achieve your goals. When you last did your projections for retirement through the tools offered from your 401(k) plan or the nifty 35 page book your financial advisor put together, are you sure the assumptions that were made were explained to you clearly? You may have left feeling great about yourself only to realize now that your plan is full of gigantic Swiss cheese like holes. Here are ten assumptions you need to consider within your plan. I highly recommend as a smart money move you use conservative assumptions so your margin for error is greater as you plan for retirement.


  • Assumption #1 – Inflation – The difference between using 3% and 4% can be a million dollars or more of capital base you’ll have to have in retirement. Which one did you use?


  • Assumption #2 – Taxes – The difference between using 20%, 25%, or 30% can also be a million dollars or more of assets you will need at retirement. Which one did you use? (And did your advisor also calculate state and local taxes as well?)


  • Assumption #3 – Your Home – Did you include or exclude your home equity as potential retirement income. If you showed selling your home in retirement, what rate of return did your advisor use on real estate? Was it 5%, 7%, 10%?


  • Assumption #4 – Asset Growth Before Retirement – This is a really important one. What rate of return did your financial advisor use for your asset growth of 401(k)’s, investment accounts, etc. Did they use 0%, 4%, 7%, or 10% or more? Every 1% better rate of return substantially shrinks the asset pool you will need at retirement. What happens if the markets returns exactly what they did the last 15 years?


  • Assumption #5- Asset Growth After Retirement- Most people focus on the assumption only up to retirement age, but your financial advisor also has to project returns after retirement. Did they use the same exact number after you retire that was use before your retire? If you did, your plan is a disaster as most people reduce their risk after retirement.


  • Assumption #6- Social Security- The first simple question is did you include it or not? If you did, most programs use default numbers. Did your advisor use the actual numbers? How much of this do you really want to depend on being there for you? And, at what age did you show taking it?


  • Assumption #7- Life Expectancy- Hardly ever, do financial advisors have this discussion. When you run retirement projections, showing the difference of dying at the age of 85 or the age of 90 can add or subtract a $500,000 to $1 million dollar difference in the nest egg you will need in retirement.


  • Assumption #8 – Living Expenses- What number did you use for living expenses? Was this a gross number or a net number of taxes? This is an important question to ask. Did you show expenses increasing with inflation or not? Did you show what will happen with expenses if one or the other spouse has a need for long term care?


  • Assumption #9 – On Going Savings Rate- This is one of the most important calculations in your retirement plan. How much did your financial advisor say that you will save every year until retirement? Did they show your company continuing to match your 401(k) plan? Did they show you getting stock options every year? Best in my mind to show nothing so you can really see what will need to be saved.


  • Assumption #10 – Assets earmarked for retirement– Far too often, financial advisors will show you your retirement picture, but not discuss which assets they said would be available for retirement. Did you add the rental properties which may or may not have equity? Were some of these accounts earmarked for a different purpose? Be sure you know what assets will be used solely for retirement.


Having seen hundreds of plans done by other financial advisors, you better check twice on whether your plan is really on track or if it is built on a house of cards. You can always go to www.oxygenfinancial.net and request a free meeting to have us run a detailed retirement plan analysis for you to make sure you are on track for your goals. I’m a much bigger fan these days of running very conservative assumptions because there is so much unknown ahead of us. Maybe it is time you sat down to make sure your plan isn’t a slice of Swiss cheese full of holes.


oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

TED JENKIN IS SECURITIES LICENSED THROUGH INVESTACORP, INC. A REGISTERED BROKER/DEALER MEMBER FINRA, SIPC. ADVISORY SERVICES OFFERED THROUGH INVESTACORP ADVISORY SERVICES, INC. A SEC REGISTERED INVESTMENT ADVISORY FIRM. Linked sites are strictly provided as a courtesy. Investacorp, Inc., and its affiliates, do not guarantee, approve nor endorse the information or products available at these sites nor do links indicate any association with or endorsement of the linked sites by Investacorp, Inc. and its affiliates.

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