What kind of a retirement plan should you have? 

The kind that works when the wheels fall off.

I often remind clients that just because something has a label on it doesn’t mean that it’s the only (or even the best) tool to accomplish that goal. 

For years food manufacturers have employed labels describing their foods as “natural” or “healthy” or “diet.” Now, these are the same foods that come in a box and I suspect could survive a nuclear blast. The fresh produce section of the grocery store may not label their broccoli, apples and nuts as anything but broccoli, apples and nuts, but I’d choose them every time (over processed food in a box) when I want something natural and fresh. 

The label (or the lack thereof) doesn’t always tell the whole story.

Similarly, the financial services industry has gotten pretty good at telling us that if we want to retire, then we should put our money into a (you got it) retirement account. And if we want our children to go to college, then we should put our money in a college education account. 

In the area of retirement, these accounts are often referred to as “plans,” as in, “I’m putting my money in a 401(k) retirement plan at work.” Well, I’m not sure that we should ever use the word “plan” for these types of accounts. 

They’re accounts into which individuals put money. They are not plans.

It’s the difference between a general having a stockpile of weapons (which is a good thing) and a battle plan (which is an indispensable thing if you want to win the battle). The stockpile represents his available resources to use in the battle plan.

A football coach has a roster of players. Some may be so-called “five-star” players, while others may be much more average. These are his stockpile of weapons if you will. But as fans re-learn every year, a star player does not a good season make. That takes a good coach with a good game plan, who then executes that plan during the game. 

And that football game analogy is also helpful to remind us that things don’t always go according to plan. So, an experienced football coach takes inventory of his available resources (the players and their abilities) and designs a plan to give them the best chance of winning possible. Often a coach has the entire first half of the game scripted before the kick-off ever takes place.

But what happens if the star quarterback breaks his leg the very first play? Or the half-back is playing poorly? Or the opposing defense is being very effective at stopping his receivers from catching the ball? 

Well, a coach knows something is always going to happen. So, a football coach’s game plan cannot be idealized as a course of action in some vacuum. It’s got to expect disruption and surprise and opposition and the need to improvise on the fly. 

Should we expect any different in real life? Shouldn’t we expect that our “plan” for retirement or financial independence will be similarly disrupted, surprised and even opposed – and that we’ll have to make improvised changes based on yet-to-be determined circumstances?

That’s why I suggest that we expand our idea of what a retirement “plan” is beyond that of a labeled account or even an anticipated course of action assuming everything goes right.

I believe wise retirement planning starts with something I’ll call a sturdy retirement structure.

And we’ll talk about that sturdy retirement structure next week.

Offering you Wisdom on Wealth, I’m Byron Moore.

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