Guest Contributor, Alex Murguia, Ph.D., CEO of Retirement Researcher
As mentioned in our last entry, we started the Retirement Income Style Awareness™ (the RISA™) investigation to identify what potential retirement income strategies align best with your style. In our Facebook group, Retirement Researcher Basecamp, we receive many questions from our members along the lines of: “What is the best allocation for me?” or “Should I buy an annuity or develop an investment strategy to draw income from my portfolio?”
It is difficult for us to answer these questions quickly, so we end up using the dreaded “it depends” kind of answer. This answer doesn’t work for you, and it doesn’t work for us either. So, after about two years of receiving these questions and observing that there is nothing out there that meaningfully assesses your retirement income style, we decided to create the RISA™ to give all of us the personal context needed to help point you in the right direction. The RISA™ examines the decision-making factors that you are implicitly using when you consider various retirement solutions to establish your retirement income style. It then measures your style preferences against the various retirement income solution sets and identifies the best fit according to your style.
There are many types of problems we encounter during our daily life. There are simple, complicated, and complex types of problems. On an individual level, the retirement income challenge is a complex problem.
Unlike following a recipe, where once you get the hang of it, success comes easy, and unlike a complicated problem that can be solved by breaking it problem into a series of smaller, more manageable steps, your retirement does not come with a set recipe for success. What works for you may not work for someone else. Everyone requires a unique and different approach. And while there are some basic ingredients like spend less than you make, save for retirement, or have something set aside for emergencies, there are no fixed tools to use or definitive steps to follow to live a fulfilled retirement.
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There is a great TED Talk by Anna Verhulst about this mindset when following a diet. If you think dieting is a series of steps, like a recipe, then dieting is simple. All you need to do is “just drink these shakes, eat these protein bars, drink gallons of water, avoid all sugars, and you will lose weight and you will feel good about yourself and be happy …” But we all know that there is more to the story in practice.
The same can be said for your retirement income plan. It’s relatively easy to distill the most important financial planning advice down to something that will fit on a napkin. Unfortunately, you need to consider what will work for you and your situation. You need to find your own retirement income style because in the end there is only one person that needs to be satisfied with your retirement income success, and that person is you.
Finding your unique retirement income style, your way to earn a “salary in retirement,” is no different than how you decided to earn a living during your working years. You spent years deciding on a profession to fund your lifestyle. You decided on your profession based on what you were naturally drawn to. You wouldn’t just let your guidance counselor choose your profession for the rest of your life. You considered your personal situation, interests, salary, appetite for job security, and chances of success, and you work to pursue it. There are many ways to earn a great living. Success will largely be predicated on you choosing a profession you can thrive in. The one that fits your style! Chances are job dissatisfaction and attrition are related to this mismatch. As an example, would Madonna have lasted as a librarian if her guidance counselor somehow managed to convince her to pursue that profession?
Your retirement income plan is no different. You are deciding how to fund yourself for the rest of your life. Your success depends on aligning yourself with a plan that fits your style. This increases your odds of sticking with the plan.
There is no single right plan for everyone. Only the one that is right for you. Get this alignment correct and you give yourself the best chance for retirement success.
In our next installment, we will discuss how once you know your style, financial decisions can become much easier to make, how we went about creating the RISA™, and the feedback from the first phase of our investigation.
To read more about its current state, click here.