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What a lot of people, including financial advisors, get wrong is this: all they look at when planning for retirement are current financial numbers. What they miss is what your future lifestyle is going to cost you. That’s a big deal.

Here’s the key question: What is it that you are planning to do in retirement? Do you plan on traveling, relocating or drastically shifting the way you are living now? Will the way you live in retirement cost you more or less than your current lifestyle?

Which comes first? Planning your lifestyle or your overall financial numbers? I suggest that you need to plan out your retirement lifestyle, so you know the costs you need to plan for. For folks that aren’t planning any big changes in their lifestyle before and after retirement there won’t be much of a change in their monthly expenditures. However, if you are planning on a big lifestyle change then be sure you know what those changes are going to cost. Developing a solid retirement plan is about minimizing surprises as much as possible. You don’t want to have $50,000 coming in a year only to realize your new traveling lifestyle is costing you $60,000 a year.  Run the numbers before you retire and make sure they sync.

When I’m coaching someone on their retirement plan, we start off looking at their DIAL, the system I created that looks at Debt, Income, Assets and Lifestyle. Once we establish what their DIAL looks like now, we determine what their future DIAL is going to look like in retirement. Using their future DIAL and the Monte Carlo Simulator in eMoney (the aggregator I use and offer my clients) we look at their probability of success. The simulation looks at 1000 different scenarios. Think of it like a score card. If the score isn’t high enough, we can change certain inputs. Maybe to reach the lifestyle goal you want you may need to work another year. Perhaps we adjust the lifestyle and see how those numbers work out. Maybe you can retire earlier than you thought. In the end, the people that I coach know exactly how their lifestyle plan and retirement plan sync together and they even have a probability of success number.

Now of course we can do all the planning in the world and there still can be surprises that pop up, such as health related issues for instance. You’ll never be able to plan for everything but what you can do is eliminate many of the surprises. That starts with having a lifestyle plan and making sure it matches your financial numbers.

Before sailing off in retirement, be sure to know your numbers including the cost of your future lifestyle. You can eliminate worrying about money in retirement if you have worked through your numbers before hand and your plan is solid. Let’s face it, nobody wants to worry about money retirement.

Get your numbers in sync so you can start enjoying your freedom sooner than later.

Live free my friends,
Eric Gaddy

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