The Journey

Waterstone Financial founder and advisor, James Gallagher, drew on his experience and engineering principles to develop and refine our process for retirement planning. 

We use this process to Design, Build and Test integrated financial plans that structure income, optimize taxes, and assure effective wealth transfer.

This is only the beginning. We continually monitor the plan and the investments making real-time adjustments as various life events unfold.

We call this process The Journey.

The first order of business for anyone retiring is to define how much income you will need, yet it’s not as simple as it appears. 

Often when people are asked to describe their expenses, they list off their basic monthly bills, like mortgage or rent, utilities, groceries, taxes, insurance premiums, etc. 

When we add up those expenses, the total is typically less than the wages they have been earning, or the distributions they are taking if already retired. Some significant costs are left out of these expenses.

What's Missing?

The extras. The vacations, the clothes and shoes, the new car, golf, tennis, boating, the grandkids, gifts, etc. All of the other things – the little extras – that make life worth living. And those can add up.

There is an important difference between the basics and the extras, and to create a robust plan, we need to understand what your lifestyle will really look like.

Longevity

The average age of a healthy 65 year old female is now 84 years old and every year that number is moving up as healthy lifestyles become the norm and medical science moves forward at an impressive rate. 

Not long ago, few people lived into their 80s. As retirees pondered the big planning questions – How long do my resources need to last? How many years will I be relying on my hard earned savings to live? – They often underestimated their own life expectancy basing it on past generations. 

Today, the reality is that if you are a healthy 65 year old couple, there is more than a 50% chance that one of the two of you will live past 90.

That’s right. No matter how old your parents were, or grandparents were, you need to be prepared to live for a long time...and avoid the Fiscal Cliff of outliving your income!

Savings and Returns

The formula is actually very simple. Your retirement lifestyle will be equal to your income (things like Social Security and Pensions) plus whatever you take out of your savings each year. So how much can you safely take out?

This is the source of great debate and puffed up claims from every product and investment group out there. The generally accepted industry rule is you should not plan on taking more than 4% distributions from your savings each year. This is based on years of research and has been studied and tested through all manner of market conditions and history.

So this answers the question – how much do you need to retire. Take the amount you want to distribute from your portfolio each year and multiply by 25. For example, if you think you will need $2,500 a month from your savings, that’s $30,000 per year, times 25 is $750,000.

But what if that is not enough?

For so many Americans, in an attempt to maintain an unaffordable lifestyle, they end up taking more than they should, and find themselves on the edge of a Fiscal Cliff!

Is there a better way?

The short answer is that there are alternatives that can increase that income level, get you a better retirement, and bring back some of the extras you deserve.