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Retirement Advice for the Rest of Us

By Chuck Yanikoski

If you're wealthy, or even merely affluent, everybody wants your business. Financial planners want to write detailed, customized plans for you. Securities firms and wealth managers want to handle your investments. Insurance companies want to sell you insurance for estate planning, or convert some of your savings into annuities to guarantee lifetime income for you. And the attorneys and the accountants and all the other specialists and handholders want you, too.

But ironically, if you're wealthy, or even merely affluent, you probably don't really need any of that help. Sure, all of it can be of benefit, but you're likely to live well and die with money in the bank whether you get professional assistance or not.

The rest of us, though, we in the middle class, are in a bind. We need more help because there is a real risk that we will run out of money before we die. Even those of us who probably have enough could run into big trouble if we have some bad luck - bad investments, bad health, or having to take care of a spouse or other family member with serious problems. So we really could use good advice. But for the very reason we need it - i.e., our assets are modest rather than huge - is the reason we are not so attractive to people in the business of providing it. They're not going to make enough money off of us to be worth their time.

But, you may be thinking you do have enough. Maybe your retirement income includes a pension as well as Social Security, and maybe you have a few hundred thousand in savings. And maybe you own your own house, and have real equity in it.

That's OK, and it might be enough, but you're likely to be spending all of your income during retirement, and quite possibly more than that (which you can afford do, if you've got savings). And you're probably not really going to take the equity out of your house so you can invest it or buy insurance or annuities with it (and if someone suggests that you do that, run very fast in the opposite direction, then report them to your state regulators).

So it's really about your savings, whether they be in the bank, in mutual funds, in an IRA or 401(k) or some other kind of retirement account, or in other investments. That's all you have that most advisors are really interested in. But is it enough?

If you have only $50,000 or $100,000, then no. You should keep that much money someplace very safe, just in case something unexpected happens in your life. So you need maybe $200,000 before a professional adviser might even begin to see you as a good prospect for financial services. And most of them are looking for more than that.

And for the most part, they still won't give you what you really need, because what you really need is a broad-based, integrated approach to understanding and dealing with all of your financial concerns, both as they exist today, and as they are likely (or even not so likely) to play out in the future. People solidly in the middle class just do not get that kind of attention from professional financial people, because it is too time-consuming for them to give it. They will spend enough time with you to sell you a financial product that might benefit you, if it will definitely benefit them. But they simply can't afford to spend the time to really understand your entire financial situation.

This problem has been on my own mind for over 20 years, when I worked as a marketing person in an insurance company where I was responsible for retirement planning. This was the very early 1990s, and it struck me that for all the effort that my company and others were putting into getting young people to save for retirement, there was almost no help for people who were actually going through the retirement process and had crucial decisions to make, or for people who were already retired and needed help adjusting to the new reality.

I quickly came to understand the issue that I have been describing above: no one could afford to help the people who needed it the most. So what was the solution?

To me, the only solution that was really going to work was to get the job done without relying on a lot of effort by a professional financial person. In fact, the job could be done even better without relying on someone like that, because there were so many financial factors and decisions to take into account at that stage of life, they were individually complex enough, and they interacted with each other in so many ways, that very few if any human minds could juggle all relationships and numbers. So what was really needed was some very good software, which could be built to do just that job. And even better if it could be built so that middle class consumers could answer all the questions themselves. They might only need professional help implementing some of the answers, but that would be the easy part.

Are there other solutions? The next best is the do-it-yourself model. If you're reading this column, then you might well be a do-it-yourself person. But you can read every book, article, and website on personal finance you can find, and you still won't know how to put all the pieces together. Keep in mind that many of the banks and brokerage firms now offer modeling tools to their customers, even those with very modest accounts and balances.

Even so, as the saying goes, it's more important to be lucky than to be smart, and that applies to personal finances, too. Still, if you can be smart as well as lucky, that's the best of all.