Though I have never worked with one, there are people whose job it is to help you plan for your retirement.

And I can certainly see why it would be better to have enough money after you stop working. Of course, the fear of running out is the driving force behind financial planners’ ability to convince people to pay them for their services.

What would you get were you to hire a financial planner? You’d probably get a financial plan that forecasts the cash you’ll spend after you stop working on items like housing, food, medical care, taxes and vacations and the cash that will come in from your investments, pension plans, and Social Security.

If the financial planner finds you don’t have enough money coming in, you might also get recommendations to purchase investments. If you do, make sure you understand all the details — including how much money the financial planner gets paid if you purchase the recommended investments or what the firm charges to produce a financial plan for you.

One financial planning firm, Wakefield-based Compass Point Retirement Planning, recently published the “Massachusetts Retirement Readiness Survey.”

Compass Point does not charge clients to prepare a financial plan. Sometimes it recommends that clients purchase annuities – for which it receives an initial fee of 2 percent and annual fees between 0.5 percent and 1 percent. More often, it recommends portfolios using exchange traded funds. Compass did not reveal its commissions for these.

This survey of 1,000 Massachusetts residents over the age of 45 conducted this year between July 9 and 13 revealed findings that may scare you. Here are some of them: 22 percent of Central Massachusetts residents are guessing on their retirement strategy and do not know where they will live in retirement. Thirty-two percent of those surveyed said that their biggest retirement worry is health care expenses, and 27 percent reported that the high cost of living stopped them from saving more for retirement.

For answers on what to do about these findings, I interviewed Michael LaBrie, co-founder, president, owner and licensed advisor at Compass Point, on Oct. 30. He thinks of himself as an engineer who happens to help people plan. As Mr. LaBrie said, “[I] studied engineering at Clarkson University, and after graduation, I used my degree by working at a consulting firm that helped Fortune 500 companies bring their products to market. I started helping friends and family members with their financial planning, which I enjoyed, and co-founded Compass Point Retirement Planning in 1995. As a matter of fact, I think of myself as a retirement income engineer, which combines both of my passions.”

Mr. LaBrie helps manage the company, but he likes working with clients. “As a co-founder with my partner, Thomas Nee of Compass Point, we manage company operations, but the most personally satisfying part of my job is meeting with clients to talk about their individual financial situations and their retirement dreams. People sometimes feel embarrassed that they haven’t saved enough or should have done something differently. The most important thing we do is help our clients stop worrying and start planning for a retirement paycheck they can count on.”

Compass Point sees itself as helping clients in a unique way. As Mr. LaBrie said, “Most retirement advisors focus on the first of two critical retirement planning questions, ‘How do we invest the money we’ve saved?’ and don’t think enough about the second question: ‘What is the maximum monthly retirement paycheck we can withdraw safely from our retirement savings without running out?’ I spent six years researching, developing and testing a mathematically engineered methodology called the TRU Method to help answer this critical second question for my clients.”

When he first meets clients, he reviews “their financial reality — what they have saved, what their investments are, what type of lifestyle they lead and what their goals for retirement are. From there, we use the TRU Method to create a plan or a money map to help them make sure they have a steady retirement paycheck and their funds last throughout retirement at the lifestyle level they want,” said Mr. LaBrie.

He has a different view of what percent of a person’s retirement savings they should withdraw to cover their expenses. “Many financial advisors use the 4 Percent Rule — [withdraw no more than 4 percent of your savings to cover expenses annually] — or its variants to estimate how much retirees can afford to spend. However, I found that there is often a portfolio valuation error in play that leads retirees who use the 4 percent rule down a path toward running out of money or missing out on their retirement dreams. The TRU Method mathematically eliminates the valuation error and creates an appropriate target withdrawal rate that is specific to an individual retiree and his or her circumstances. We help retirees avoid running out of money early and we allow retirees to maximize their standard of living,” he said.

He sees Worcester area residents as being “in the middle of the pack in terms of feeling confident that they have enough money saved for retirement and knowing how much money they need to live through retirement.”

But Mr. LaBrie is concerned that 22 percent of Central Massachusetts people are “guessing on their retirement strategies. Feeling confident in your savings does not equate to a sound retirement plan. My advice to them is to not lose sight of the second question: How much of that money can you withdraw each month to sustain your retirement lifestyle? This is not a question they should guess on.”

Peter Cohan of Marlboro heads a management consulting and venture capital firm, and teaches business strategy and entrepreneurship at Babson College. His email address is peter@petercohan.com.

 

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