As a certified financial planner and finance expert with Burgeonvest Bick, John DeGoey has spent decades working with everyday people to figure out how to retire with a nest egg that’ll cover their needs. John was kind enough to share some insights with us about retiring – and how to do it right.
What’s the most common misconception about retirement planning that you’ve seen, and what’s wrong about it?
People assume that what worked in the past will work in the future, too. Lots of things are wrong with it, but to me, the two most prominent things that people seem to miss is that life expectancy is likely to be longer than they think, and returns are likely to be lower than they think.
What’s the measure of a good retirement investment?
In general, you should be looking to build a portfolio that allows you to maintain a lifestyle that you’ve grown accustomed to with only a moderate amount of volatility. For most people, the plan should be not withdrawing more than about 4% of their principal (indexed to inflation) annually. For instance, people with a $1,000,000 nest egg should withdraw no more than ~$40,000 in the early years.
How diversified should a retirement portfolio be?
I recommend six asset classes, with exposure in each class to anywhere between 200 and 2,000 securities.
What are some good ways to save a little more on your retirement?
Pay yourself first: save a bit automatically from every paycheck. Be lucky enough to have a good pension plan, preferably one that is “defined benefit.” Invest your tax refund before you get a chance to buy something frivolous.
If you could go back and give yourself some advice on retirement, what would it be?
Plan to work longer. That is advice that I “went back” to give myself earlier this year. I used to try to freak people out by saying I would “retire early” at age 67. I now think it’ll be later still.
What’s the future of retirement planning?
Helping people to focus more on quality of life and lifestyle considerations. Abraham Maslow would be pleased. Middle class to wealthy people are focusing on everything up to (and now – possibly including) self-actualization. Sadly, world events might cause this generation to be the wealthiest ever. Lifestyles might start to ebb in the near future.
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