DOLLARS AND SENSE - Disciplined plan key to funding retirement

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Will I run out of money in retirement?

If you can't answer this question, then the answer is yes, you are likely to find yourself unable to fund the retirement you envision. Unless your retirement income is largely pre-established and guaranteed - like defined-benefit pensions and Social Security - the amount and reliability of your income will depend greatly on your retirement income plan.

If you have not established a retirement income plan, or if your plan leaves you unable to answer this simple question with confidence, then you are lacking a foundation that is almost certainly necessary for success. Confronting your personal retirement situation in detail - including the confusing and discouraging parts - is essential to forming realistic expectations.

If you do not live with your means today, then the answer again is yes, you will run out of money in retirement as the cost of your borrowing erodes your income. If living within your means is a problem now, it will invariably follow you into retirement.

Every good retirement plan includes a detailed monthly retirement budget. Sitting down to create this budget is often an eye-opening process; if you haven't done this yet, take the time to do it right now on a scrap of paper.

But your retirement budget will be useless if it isn't followed, and that is something you can work on today. There are many books, techniques, and websites that help you create, track and stick to a realistic budget. Keep trying them until you find one that works and then stick with it religiously.

If you are relying on the "free" advice of commissioned financial salespeople, then once more the answer is yes, you are likely accepting more risk and paying higher fees than you realize, when your retirement plan can afford neither. If you are in the position of using an invested nest egg to generate monthly retirement income, you are the bread and butter of an entire industry designed to relieve you of a large part of that income at little risk to itself. Decades of academic research have shown that complex, proprietary, and expensively-managed financial products actually underperform simple, generic, inexpensive, unmanaged financial products, withwhich have the added benefit of not undermining the motivations for the advisor-client relationship.

There is no substitute for self-education in retirement planning. Knowledge is power, confidence and protection when making retirement and investment decisions.

It is not unreasonable to spend a significant amount of time and energy to acquire in-depth knowledge of a subject when the payoff is so big. You have done the same for school, for your career, even for your hobbies. You can start with "Can I Retire?" by Mike Piper, at less than a hundred pages, and then get more detailed with "The Boglehead's Guide to Retirement Planning."

If you are reluctant to start educating yourself, remember that you don't suddenly have to make every decision on your own, just because you gain a little knowledge. All you have to do is keep reading, and as you gain confidence in your knowledge it will naturally begin to affect your decisions.

Ethan Pooley is a participant in the Walla Walla Asset Building Coalition. The author has been a state-registered financial planner, but does not currently accept clients. He invites comments and questions to ethan@ethanpooley.net

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