• Financial Planning: Retirement

    By Leon Grove DBA, Full-Time Faculty 
    Published August 2014



    According to the Pew Research Center, on January 1, 2011, the oldest members of the Baby Boom generation celebrated their 65th birthday. In fact, on that day, today, and for every day for the next 19 years, 10,000 baby boomers will reach age 65 (Baby boomers, 2010). The significance behind this research is that as people get older, the more they will begin to think of retirement and/or the resources they have to secure their retirement planning needs.

    A more practical way to view saving for retirement is to structure a ladder approach to savings—whereas the income distribution in retirement will began at the bottom of the ladder and upward as needed throughout a retiree's years in retirement through, for example: 

    • Foreign Investments
    • ETF
    • REITS
    • Stocks/Bonds
    • Mutual Funds
    • Deferred Asset
    • Liquid Asset
    • Pension/SSI

    Let's switch gears for a moment, while people are beginning to think more about retirement planning or will like to start planning for retirement, this section is designed to help people understand how they can secure their retirement planning goals.

    As a practitioner, I have found that people generally skip over the key basic of planning: reserving cash for savings or any other purposes, which makes planning for retirement realistic. This fundamental is a hurdle that many people need to overcome. This hurdle is called debt management. Debt management is an aspect of planning that starts with savings to include balancing sources of cash. There are two basic evaluation tools introduced for consideration: (1) a budget, for managing and controlling debt, and (2) a check register to manage day-to-day expenses.Let's switch gears for a moment, while people are beginning to think more about retirement planning or will like to start planning for retirement, this section is designed to help people understand how they can secure their retirement planning goals.

    The first determination that should be developed within the budgetary planning is determined by how well positioned the assets for emergency funds are-there should be 3 to 6 months of expenses set aside (minus income taxes, FICA, savings/investments). Below is an example of appropriate and inappropriate vehicles for emergency funds. 

    Emergency Funds


    Cash/Cash equivalents

    Money market

    Short-term CDs (< 90 days)


    Checking: must reserve an amount equal to one month's expenses



    Debt/Debt instruments

    Life insurance cash value

    Anything that creates a debt or liability


    Debt management is the key to living within the budget parameter; here are some general rules to debt management:

    • Monthly housing debt (PITI, fees) ≤ 28 percent of gross income,
    • Total monthly debt payments ≤ 36 percent of gross income, and
    • Total consumer debt ≤ 20 percent of net income (consumer debt consist of, for example, credit cards, other short-term loans, auto loans).

    While retirement planning is important for the long term, emergency funding will help strengthen current financial situation; there is one other aspect that will help increase financial security, and that is saving about 5 to 10 percent of gross pay continuously. This is neither the retirement fund nor the emergency fund, but a savings strategy that one can create. If and when people decide to accomplish some basic rules within their budget to manage their overall debt structure, then they will be better suited to work on their retirement planning initiative.



    Baby boomers retire. (29 December, 2010). Retrieved from http://www.pewresearch.org/daily-number/baby-boomers-retire 


    Leon Grove is a full-time faculty member at Kaplan University. The views expressed in this article are solely those of the author and do not represent the view of Kaplan University.



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