Build Your Retirement Plan With a Strong Fiscal Foundation

When people dream about retirement, they think about the things they'll do, the places they'll go, the people they'll see.

Unfortunately, too often what they don't think about is how they're going to pay for all that.

They've got Social Security coming, maybe some savings, a 401(k) from work and perhaps a pension—but no real idea of how far that will stretch or what their future may require.

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Instead, they'll pick out an age. "I'm going to retire at 67," they'll say, without any plan for how that's going to happen.

But no one can say with 100% certainty what their life is going to look like five years out, much less in 10 or 20 years. And some people retiring in their 60s could live for another 25 or even 30 years. So the number you really have to know isn't how old you'll be when you retire—it's how much you'll need.

Then you and your financial adviser can develop a strategy to help you work toward that number.

In this way, a financial adviser is like an architect, creating a "retirement blueprint" for you based on your individual needs and goals. With such a blueprint, your adviser can better assist you with charting out a retirement that matches your vision for your later years.

A lot of the people I meet with know what they want their retirement to look like, and they're working on acquiring what they need to build it, but they don't have that blueprint to put the whole thing together. They don't have a structured way of drawing down certain assets, implementing cash flow on others, dealing with inflation and taxes or assuring asset protection if someone needs long-term care.

Instead, like so many people who are nearing or in retirement, they have a sort of "kitchen junk drawer" of retirement products that they've accumulated over the years, but with no overarching strategy that can help them work toward achieving the secure and satisfying retirement they desire.

The first conversation you have with your financial adviser lays the cornerstone, so treat it like an interview. Talk to more than one adviser until you find a connection, and make sure it's about developing a strategy, not focused solely on products.

One thing I like to do with new clients is run a Morningstar report early on for a 10-year look back at their current investment mix. This will give them a window into the past and an opportunity to see how their portfolio behaved during certain market cycles. Then we can look at the sort of behaviors a different plan would have compared with the plan they're using.

Financial vehicles—such as fixed annuities with guaranteed lifetime income riders and single premium immediate annuities—that guarantee steady, safe cash flow should make up the foundation of your fiscal house. Those guarantees, of course, are backed by the financial strength of the issuing insurer. Then you can sprinkle in certain amounts of risk, depending on your tolerance. (I like to lean on the Rule of 100, which uses age to determine asset allocation. For example, if you're 50, 50% of your money should be in safer investments and 50% would be a bit riskier. At 65, 65% should be safe. And so on.)

A good adviser will make sure the strategy is designed to evolve with you in your golden years. If you need to turn on a dime because of a life change, you'll have the flexibility to do that. And as you go, he or she can help you find the tools to help fill gaps in your retirement plan.

You'll make decisions based on information instead of emotion. Your adviser will focus on creating a strategy for you, not solely on products.

The goal is to build a cohesive strategy together that is designed to help you keep the lifestyle you had before retirement. Or, better yet, potentially provide you with the lifestyle of your dreams.

Kim Franke-Folstad contributed to this article.