"What If" Scenarios

Investment Strategy

The Harrison's slow rate of savings means changing investment strategies will provide them little relief. Even correctly executing an asset allocation strategy with a median growth rate of 10.84% will give John and Helen only another three or four years of retirement income before they hit a shortfall.

No Recreational Vehicle

Not purchasing their dream RV and channeling the savings into taxable and retirement savings accounts would give the Harrison's substantial savings for investment and retirement income. However, John and Helen are very intent on purchasing the RV.

Retire Later

If John and Helen retire when they are each age 67 instead of 65, the benefits of drawing later pensions and Social Security could provide a substantial increase in their retirement income. Unfortunately, the RV purchase, wedding expenses and cost of studies abroad will still have drained all of the Harrison's savings, leaving them with pre-retirement shortfalls and no retirement savings. John and Helen are not interested in retiring later than age 65.

Moonlighting

John might consider keeping his part-time tax advisor position until he retires at 65. This would reduce the Harrisons' pre-retirement shortfalls and provide for additional retirement savings. However, these savings would be exhausted within 4 years of retirement, once again leaving John and Helen without a safety net to fall back on.

Reduce Expenses - Increased Savings - Moonlighting

John and Helen need to build up reasonable reserves in case of unforeseen expenses or emergencies -- especially as they consider living part time on the road. The most prudent thing they can do is to reduce their current expenses and move more money into savings. John's willingness to continue his seasonal work until retirement could greatly expedite the Harrisons' ability to build up a comfortable nest egg.

John and Helen reviewed their expenses and decided on the following reductions.

Entertainment from $3,000 to $2,400 a year. Food from $6,000 to $5,400 a year. Travel from $5,000 to $4,000 a year until the RV is purchased at which time they will increase to $6,000 a year instead of $7,000 a year as previously planned. John and Helen have also decided to stop buying new cars every 5 years. Instead, they are going to reduce their car payment expenses from $14,400 to $7,200 a year.

All in all, these changes will reduce the Harrisons' expenses by $700 a month, or $8,400 a year, allowing an accumulation of assets to create reasonable savings before retirement age. This savings will be available for investment and should provide sufficient protection from unforeseen expenses and emergencies.

Future Considerations

• Asset Allocation Strategy
• Life Insurance
• Long Term Care Insurance