I support the concept of being your own retirement and financial planner or at least being in full control of the process. It is your money at risk and your retirement future being planned. You are best qualified to understand your risk tolerance and your retirement goals.
Being your own financial planner works only if you have the time and energy to put into the job. It also helps if you have some aptitude with numbers. Although financial planning is a long way from being rocket science, some people are just not comfortable with math and money. They can get help from a trusted professional.
As a first step in this process, I recommend a three part self-evaluation to determine if you have the aptitude to be your own retirement planner. First, can you create and operate a spreadsheet? Second, do you (or can you) manage all of your money in a personal finance software package? Third, can you prepare your own income tax return? If you can’t handle these tasks, you probably need the assistance of a professional. If you pass the self-evaluation, here are the next steps.
1. Get educated. It is easy to acquire the core knowledge and skills related to basic financial and retirement planning. It can be found on the Internet and at the library. Start by learning the basics of micro- and macroeconomics. Then methodically learn the fundamentals of personal financial planning. The University of California at Irvine has an online course that you can take for free. A lot of the content is perfect for the beginning retirement planner.
2. Acquire the tools. As you become educated, you should acquire the tools needed to implement your retirement planning knowledge. These tools include the personal finance software of your choice and setting up online access with your various banking and investment accounts.
3. Gain confidence. To achieve success you must have confidence in your abilities. Confidence comes first from preparation and then from practice. If you want to test your abilities and knowledge in managing a portfolio of retirement investments, set up a fake portfolio and watch what happens. Many online sites allow you to do this for free.
4. Set goals. A retirement plan is a road map leading to one or more goals. Goal setting is critical. Everyone has different financial and retirement goals. Find yours, write them down, and then ask your spouse to sign off on them.
5. Create a retirement plan. After you have your education, tools, confidence, and goals in place, it is time to create the plan. Most money management software tools provide some capability to establish goals and track progress toward those goals. Make sure your spouse understands and buys into the plan.
6. Be decisive. Once your plan is in place you must implement it. I know from personal experience that it can be difficult to make changes in your financial life. You just have to do it. Being stuck in place by inertia defeats the plan and may ruin your retirement.
7. Stay current. Financial and retirement plans may need updating or adjusting in response to changes in external conditions. These changes can be with your personal circumstances, in the economy, or in the investing markets. Even if your retirement plan is a set it and forget it investment portfolio, part of being your own planner means monitoring and adapting to external conditions.
If you become successful with your retirement planning and acquire wealth, you may reach a stage where you will need professional help with estate or tax planning. You can hire a professional to help out but not take over. You should always stay in charge of your financial plan.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.