Often times, when talking to clients about their financial plan, I like to use some analogies. One of those is thinking about their financial and retirement plan in terms of a sturdy table.

That may sound weird, but lets think about it for a second. A table comes in many shapes and sizes. It can be one legged, six legged, solid wood, flakeboard or all sorts of other combinations. So what makes a table strong? Usually a few things. The first, is a nice solid material. Second however, are the legs under it.

I often ask clients to envision their financial plan as that very table. I ask them how many legs they think it takes to make a sturdy table. Usually, Ill get an answer of four or six, which, would make a pretty strong table. Then, Ill let them envision each of their income sources in retirement. Sometimes, they can only think of one or two. In that case, Ill ask them to envision that one legged or two legged table. The big question at that point is, how easy is that table to knock over? With one or two legs, a simple bump or a strong wind can usually do the job.

Now lets go back to your actual retirement plan.

Maybe you only have one leg, which is your pension. If that pension were to get cut o to go away, your table falls easily. Same goes for a two legged table. If one of those legs gets knocked out from under you, again, your retirement table can easily fall. So what can we do? Well, we can spend our earning years making sure we have a strong table. Lets see how:

  • Leg 1 – Pension
  • Leg 2 – Social Security
  • Leg 3 – Qualified assets which can be used as an income stream
  • Leg 4 – Nonqualified assets that can be converted to income

With that, we have a nice 4-legged retirement plan.

  1. The big question at this point is do we have a flakeboard table or a nice solid oak? That’s the time we can take to review our insurance strategies.
  2. Have we done enough to make sure that our assets are protected from an unexpected catastrophe?
  3. What about Long Term Care or Assisted living?

The answer to those questions can be the difference between a table that can be passed down through the generations, or one that will crumble under some heavy weight.

So, how many legs are on your table? If you don’t know, ask your advisor. As always, we’d love to talk to you and help.