For some, managing finances throughout your lifetime may feel like a smooth, straight line. But for the majority, that line is full of zigs and zags. Opportunities and challenges constantly unfold before us. Like the $1,200 repair bill for my daughter's car last week (which, by the way, is just about how much the car is worth).  Zig. Or the true cost of plane tickets for my family when you add in all the ridiculous fees.  Zag.
One of the biggest zigs of our lifetime will be the moment of retirement. A group of us at The Principal recently conducted some research to understand the financial significance of retirement for Americans who are on the verge. We wanted to know: just how big of a deal is that moment of retirement? We think it's a huge deal. Perhaps the biggest zig of all.
More specifically, we wanted to know just how concerned individuals are about the day the paycheck turns off. Much to our surprise, a large percentage of the people we spoke to did not see that moment as a big deal, despite potentially gigantic pay cuts - even for those with no or modest savings.
We attributed this discovery to three main reasons:
- Admiring a Balance. Most people had never crunched the numbers to fully understand how their savings would translate into income and how that could be impacted by living longer, healthcare costs or economic uncertainty. They saw a balance (ex:200,000 in their 401(k) account) and that balance felt like a mountain of money to them. However, according to the 4% rule, someone with $200,000 in a 401(k) should only be withdrawing $8,000 per year to ensure they don't outlive their savings.
- Invincibility. Many people see themselves as invincible, both physically and psychologically, as they enter retirement. There is an enormous body of historical data that would suggest otherwise. Whether we like it or not, our bodies and our brains slow down as we grow old - which can make it increasingly harder to manage through financial zigs and zags in our post-paycheck lives.
- Multiple Plan Bs. Whether it's going back to work, subsisting on bologna sandwiches or downsizing a home, pre-retirees are quick to share their back-up plans. While back-up plans are important, we should be honest with ourselves (and those who depend on us), especially as it relates to going back to work deep into our retirement years.
The moment of retirement is a big deal from a financial standpoint -  a Big Zig. You are about to move into a phase where the earnings stop and the spending continues. But it is not a moment to panic, worry or feel like you fell short. Rather, it is a time to examine your savings and make a plan to ensure that what you spend is positioned as effectively as possible.
For the millions of pre-retirees who are not working with a trusted adviser, there may not be a more important time to seek professional help than the few years before retirement. No matter how well or how poorly you planned during your working years, the moment of retirement (or the time in close proximity) should be seen as a time to revisit your plan. It's a big change moment. It is not a moment to drift financially. Because your paycheck does not drift away - it turns OFF.  Zig.