Yes, back on topic. Here’s how we figured it out with the help of our FA*:
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Do we want to live at a level less than, equal to, or more than our current standard of living? (We chose to keep our current standard of living, but you need to start there; you can’t know how much is “less” or “more” until you’ve figured out what “is.”)
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Exactly how much was funding our current standard of living? (Easily known from a decade of tracking monthly cash flow. Whether some categories would become obsolete was immaterial as others would most likely replace them.)
Then she asked us many (many) questions, like:
- How often do you replace your cars?
- Do you plan to stay in your current home (if so, what repairs may be needed; if not, where do you plan to move/how much do you plan to spend on housing?)
- How much is your estimated SS FRA and when do you want to take it? (We did not want to figure SS into our plan)
- Do you want to travel? (If so, how often and with what budget?)
- Do you see yourselves owning a second property? (No, but that didn’t hold.)
- How much do you currently having in savings and investments and how are you funding them?
- How many children do you have? (Do you plan to pay for college/weddings/cars?)
- Do you plan to leave an inheritance? (Do you want to grow your assets, preserve, or draw down?)
- At what age would you each like to retire and how long do you want your funds to last?
- How much do you think you need? Do you have a number in mind?
- What is your investment risk tolerance?
From this information (and much more), she worked a dynamic model that considered inflation, escalating healthcare costs, long-term care, the potential cost of private OOS college in the year our son graduated from HS, a 20% market pullback every eight years (we are risk averse), etc. In addition, she helped us create a trust, wills, HCPOA, funeral directives, etc. She also started a 529 when our son was in first grade and, about the time he turned eight, began teaching him about investing and advising him on how to manage his savings account. She kept advising him through his high school years. By the time he entered the academy, he had a nice portfolio of his own which he manages himself now.
Regular meetings, discussions, and modifications as our lives changed (we’ve been with her over 20 years now) produced a living plan and a portfolio number that made sense and that we were comfortable with. She also addressed the mental transition to retirement in our discussions (targeted to DH, I was just counting the days). When we finally met our nut and were trying to decide exactly when to step off, she told us, “Retirement is a faith position. You’ve done the work and you’ve gotten where we agree you need to be. You need to believe in that work. You’re good to go.” We worked two years past that discussion to build a cash fund for some final nest feathering, and then we had an unexpected windfall when our son chose a service academy and the 529 funds came back to us penalty-free (minus taxes on the gain).
*We’ve been comfortably retired eight years now, no surprises, and even with this pullback, we’re further ahead than when we stepped off. I know many here distrust FAs and do well managing their own funds but, in our case, we look at it as marriage insurance (we don’t want to blame each other for any bad decisions) and don’t begrudge a penny we’ve paid for her wisdom and solid management of our investments. We sleep well at night.
ETA: I know nothing about munis. 