How to Score a Hole in One With Your Retirement Planning

I recently returned from a golf trip to Bandon Dunes in Bandon, Ore. If you’re a scratch golfer, I imagine this is heaven. If you’re like me, it’s a place just south of heaven where you go to lose all your confidence in your golf game. Vacations have always been a great place for me to think creatively. Most of my business marketing ideas come from the clarity of being out of the office. This trip was different. For five days, all I could think of was: “Easy swing. Follow through.”

It made me think what the “easy swing and follow-through” of retirement planning is. In other words, what are the simple fundamentals that will lead to good results?

Let’s start with that easy swing.

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1. The alignment of your stance is the equivalent of your financial plan.

In its purest sense, your financial plan ensures that your assets are aiming in the direction of your values and goals. If you want to help ensure your plan is on the right track, you can build one for free here.

2. Your club equals your asset allocation.

It’s just as tempting to buy Nvidia (NVDA) right now as it is to try to drive that short par 4. It’s probably better to swing easy and get there a bit more slowly rather than lose your ball in the water because you were greedy. Putting it more concisely, don’t swing for the fences if you’re retired or about to be.

3. The actual swing equals what you can control.

In golf, you can’t control the conditions. In retirement planning, you can’t control the market or the economy. Here are the things you can control and should focus on:

Cost. According to S&P Global, over 87% of all active large cap mutual fund managers did worse than the S&P 500 over the last 15 years, ending December 31, 2023. Why? Cost is one of the biggest drivers of underperformance. It creates a hurdle that fund managers must, but often don’t, overcome. It’s the biggest reason we don’t like to have mutual funds in our client portfolios. Of course, there is a time, a place and even a few winners, but we take the sure thing of low-cost.

Consolidation. All of your accounts tell a life story. I had this 401(k) from that employer. I signed up for this bank account to get a $500 bonus. In retirement, simple beats optimal. There are so many flexible, low-cost investment platforms that there is no good reason to have a lot of different investment accounts. They become too hard to manage and withdraw from, and they create a mess for your beneficiaries.

Asset location. This is the lesser-known cousin of “asset allocation.” Try to hold the right type of investments in the right places. For example, income from REITs is considered ordinary income, so REITs should be held in a retirement account. Growth stocks tend not to pay dividends, so they should be held in taxable accounts.

The follow-through includes the things that, even if you do easy-swing issues one through three above correctly, can prevent your ball from flying according to the plan. Here are the biggest misses I see on the follow-through:

1. You’ve done no tax planning.

We’ve all heard the saying, “It’s not what you make. It’s what you keep.” This is that. I’ve seen people so focused on getting their investments perfect that they miss big tax opportunities and end up paying six or seven figures more than they have to in retirement, in taxes.

2. You’re not sufficiently insured.

Insurance planning changes in retirement as you shift from insuring your income and liabilities to insuring against major health events. Many people have no choice but to accept the fact that going into nursing care for a prolonged period will wipe them out. Most of our clients want some sort of protection against this risk, even if it’s just the equity in their home.

3. You didn’t follow through on the estate planning.

Drafting a will and/or trust is not enough. There is typically a set of instructions on assets that need to be retitled or beneficiaries that need to be designated. Until this happens, you just have a big binder full of paper.

It turns out there’s more than I thought to an easy swing and a follow-through. I’m feeling better about my golf game already.

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