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CNBC Says that Your Financial Plan Can “Stress Test” Your Retirement Strategy – but We Say, “Not Unless It’s a Financial Dashboard”

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Can your financial plan act as a kind of “stress test” to see how well-prepared you are for a tumultuous economy?  We think that’s an important question to ask yourself as we look ahead to a new year in 2023 – and according to this CNBC article from last July, that’s exactly what a good financial plan should be able to do. But while we like the “stress test” concept, we found the rest of the article, co-written by reporters Sharon Epperson and Stephanie Dhue, sorely lacking in substance. Epperson and Dhue introduce the stress test concept, then leave us hanging.

As you probably know by now, Rajiv Nagaich of AgingOptions is an enthusiastic proponent of a different type of financial planning tool, called a financial dashboard. We’ll have more to say about that in a moment, but first let’s see what these CNBC reporters have to report in their article. We definitely agree with the “stress test” concept, which is why we’re sharing this article. We just don’t feel that the article does enough to help you plan adequately.

As part of our focus on the New Year, we’re bringing this concept back for a closer look.

Few Than 1 in 3 Have a Written Financial Plan

The CNBC article is based on a simple and straightforward premise. “With inflation rising and account balances falling,” the reporters write, “financial advisors say having a plan is more important than ever — and can help ‘stress test’ your investment strategy.”   We agree – but the sad fact is that a very large majority of Americans, including those thinking about retirement, are sailing into the financial future without a chart or a compass.

“Many Americans are unprepared,” says CNBC. “About 63 percent of workers admit they don’t know as much as they should about retirement investing, according to a recent survey by Transamerica Center for Retirement Studies. Only 35 percent work with a professional financial advisor and just 29 percent have a written plan, the survey found.”  That’s a striking statistic, especially in light of today’s financial turbulence. 

Life-Changing Conversation with a Planner

The CNBC article spotlights a North Carolina woman named Connie Gores who became “keenly focused on preparing for retirement” when she was in her mid-50s, with one daughter in college and another newly graduated. Gores, with a successful career in higher education, first met with a financial advisor during the financial crisis of 2008.

As Gores told CNBC, “The conversation changed my life.” Gores had asked the advisor to run an analysis to project what her retirement lifestyle would look like, based on her then-current benefits and savings rate. She was shocked by the planner’s reply. “He said to me, ’Well, I just want to tell you that right now, as it sits, you will not have enough money to live the way you want to live, and you’ll have basically Social Security and a little more,” Gores recalled to CNBC.  She called that meeting “a wake-up call.” 

Gores said she remembers the example of her own mother who had worked in hourly jobs until she was 82, got sick and died three months later. “That is not the life I wanted,” Gores told CNBC. So, working with her advisor, Gores came up with a saving and investing plan which, ten years later, allowed her to retire comfortably at 65, years earlier than she had expected. 

Staying the Course Isn’t Always Best

In stressful financial times, many economists tend to give pretty conservative advice, says the CNBC article. “‘Staying the course’ is often cited as a key retirement savings strategy by financial advisors,” the reporters write. “Yet, that can be tough for many workers as they try to stomach a dramatic plunge in the stock market.” They cite as Exhibit A the sobering fact that   S&P 500 Index had dropped 20 percent in the first six months of 2022, reportedly “the worst mid-year performance in over a half a century.” (Editor’s Note: That figure was from the article’s original publication date. We note that the overall decline remained at 20 percent throughout 2022.)

The CNBC reporters Epperson and Dhue spoke with TIAA planner and financial strategist Shelly-Ann Eweka who acknowledged the challenge. “It is hard emotionally when you go online and you see your account value just dropping, dropping, dropping,” Eweka told CNBC. But then she gives what seems to be inconsistent advice. “I just encourage everybody to stay focused,” she said. “You can’t just assume that ‘I’m just gonna just keep putting money aside into my retirement account and see the value go up every year, and then when I retire, I take the money out to cover my lifestyle and that’s it.’”

What does that mean exactly? We’re not sure.

Financial Planning 101

The CNBC article concludes with a basic – very basic – list of the things you’ll need to “get started making a financial plan for retirement.” CNBC’s list includes:

  • A basic understanding of your expenses
  • What the article calls “your needs and wants in retirement”
  • An estimate of all income including Social Security, investments, and part-time work 
  • A projection of future health-care costs.

Sadly, that’s it. In spite of the article’s focus on “stress-testing” your plan in order to be better prepared for the future, the CNBC article contains no further explanation. For that we turned to Rajiv Nagaich of AgingOptions, who called the article “laughably simplistic.”

“This is another example of what I would call ‘financial planning for dummies,’” Rajiv said. “I agree with the concept of a stress-test – after all, what’s the point of a financial plan if it doesn’t allow you to peek into the future and make adjustments so you can live the life you want? Unfortunately, this article, like many I read, is very, very short on substance. It tells me what the so-called experts say I need, then leaves me to figure it out myself.”

A Financial Dashboard: the Real Solution to Uncertainty

The real solution, says Rajiv, is to meet with a qualified fee-based financial planner to develop a financial dashboard. This sophisticated, personalized tool lets you see at a glance how your strategies for saving, spending, and investing will affect your future. It also allows you to look at the effect of different rates of inflation, taxation, and other factors that can drastically change your future financial health.

“With a financial dashboard,” says Rajiv, “you can run what-if scenarios and see what tomorrow might look like using different assumptions.  If you really want to ‘stress-test’ your retirement planning, and make sure you achieve your goals, a financial dashboard is the only way to go.”

If you’re intrigued by this powerful concept, contact us at AgingOptions. We’ll happily refer you to a qualified planner who will work with you.

My Life, My Plan, My Way: Get Started on the Path to Retirement Success

At AgingOptions we believe the key to a secure retirement is the right retirement plan – yet the fact is, statistics show that 70 percent of retirement plans fail. That’s why for nearly two decades we’ve been dedicated to the proposition that a carefully-crafted, fully comprehensive retirement plan is the best answer to virtually any contingency life may throw your way as you age.  Our slogan says it all: My Life, My Plan, My Way.

When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

(originally reported at www.cnbc.com)

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