May 18, 2020

Ask Smart Questions, Get Good Data and Find Unbiased Help: Your Future Self Will Thank You

A version of this article originally appeared on LinkedIn.

A quick look at the weather app on my phone tells me the coming week will most likely be full of beautiful fall weather. Right away, I make some plans. I can spend some time in my garden over the weekend, we can get out for a hike, and there is no immediate rush to pull out my sweaters and turtlenecks just yet. I feel happy.

What I just did – get some info, think about what I want, make a plan – is a cycle of behavior we continuously repeat in our lives, and it's not limited to little things like weekend weather. It applies to the big, important things in life too – our families and relationships, our homes and communities, our careers, our finances. We're constantly getting new information about all of these things and either making or adjusting our plans. 

It's a dynamic process and it directly affects how we feel about ourselves and our lives. Twists and turns occur. Changes in the weather happen. And sometimes they catch us off guard and make us vulnerable to drifting off course.

Is there a better way to factor in all the inputs available to us today and create more flexible plans for our future selves?

I think about this question a lot when I consider retirement planning, which is all about making decisions now that will shape your life once you stop working. That's no easy task. It's hard enough to think about what life will be like a year from now, let alone a decade or more out.

In a recent Schwab survey of 401(k) savers, we found that many people are uncertain about how much they need to save for retirement. For example, one in three told us they don't know how long their nest egg will last once they retire.

These unknowns make it difficult to get started on a sound but flexible plan for retirement and make many people anxious. Our research found that saving enough for retirement is the top source of financial stress.

So, what should people do?

Start with good inputs

I like my weather app because it shows me the basic outlook and gives me some data points that impact how I plan. For example, it shows mostly sunny days ahead, but it also points out that there is a chance of rain on certain days. Knowing this, I'll keep an umbrella handy, and I can manage my expectations about how much time I can spend in the garden and which days would be best.

You can apply the same approach to your retirement planning. Ask yourself what you want retirement to look like, then make a plan for it. At the same time, factor in what might get in the way.

For example, ask yourself: When would I like to retire? How much do I have saved? How much more do I need to reach my goal? What barriers could stand in the way of staying on track? What sources of retirement income will I have? How long do I need this money to last? What type of lifestyle do I want? What is my health outlook?

In addition to asking and answering questions like these, get actual numbers. Workplace retirement programs typically provide free tools and calculators to help you understand how your specific situation might play out in real dollars in your retirement future. There are also many online resources that will do the same thing. Take the time to make these calculations and then consider the projections in the context of the 'ideal retirement' picture you are painting for yourself.

Get an unbiased perspective

No matter how good your inputs, they will still get shaped by your emotions. It's part of being human.

Ask for help to make sure you see the full picture rationally and practically. Talking to a financial professional can help you make sure you ask yourself the right questions and factor in the correct calculations for your situation. In our survey, participants acknowledged that their confidence making investment decisions increases with professional help. Almost half (49%) report they would be very confident in their investment decisions with help versus only a third (32%) feeling very confident on their own. Also, calculating how much is needed for retirement is the top area where they would like help with retirement planning.

Your future self will thank you if you take the time now to really think through the right inputs and get help to shape a plan that can work. And your current self can manage financial stress better because you know you have that plan in place.

I'm pretty confident the weather will hold up this weekend, and I can't wait to get into that garden.