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Let’s focus on financial independence, not retirement!

by jeffery a. acheson, qpfc, aif®
partner, schneider downs wealth management advisors, lp

Financial security in retirement is one of our nation’s cornerstone principles when it comes to how we envision a deserved quality of life after years of hard work, dedication and sacrifice. Unfortunately, for many Americans, the future of retirement planning stands at a crossroads, and without a wake-up call and a new direction, that vision may become an unfulfilled dream


There are a multitude of reasons that can be cited for this lack of retirement readiness, but some are very basic, such as a lack of commitment to deferring current income to create future capital or simply starting too late to save to allow sufficient compounding time to create the desired outcomes. At the other end of the spectrum is underestimating both life expectancy and its corresponding income needs and the impact of rapidly rising health care costs on the budgets of those over age 65.

There is an old saying: “The truth will set you free but first it may scare you to death.” Well, at times a good scare is worth its weight in gold if it brings one to action in addressing the issues. So, with that in mind, let’s look at a few facts:

•     The Average 401(k) Account Balance at the end of 2010 was just $60,3291

•     The Median 401(k) Account Balance at the end of 2010 was just $17,6861

      - 17% of balances > $100,0001

      - 39.2% of balances < $10,0001

•     50% of all Americans have TOTAL SAVINGS of < $10,0002

•     Fidelity Investments estimates that a 65-year-old couple who retired in 2012 needs about $240,000 to cover medical expenses throughout retirement, a 50% increase from the $160,000 first estimated for those retiring at age 65 in 2002.3


At one point or another while traveling, most all of us have experienced that annoying GPS voice telling us we are off course and that it is “recalculating route” to assure us of successfully reaching our desired destination. Based upon the few facts above, I would suggest that recalculating our financial planning route is necessary and needs to be done rather quickly.

However, as our first step, I would suggest we stop focusing on the ultimate reward: retirement at a particular age where an all or nothing event takes place (e.g., I will retire and stop working at age 65).  We are all bombarded with commercials like the one from a major insurance company asking us, “What’s your number?  A million dollars, two million dollars, a Gazillion dollars?” These astronomical figures “required” for our all-or-nothing event can seem so overwhelming that the message causes many to lose hope and fail to properly plan, or in some cases, not plan at all.

Instead, let’s focus our efforts on the accumulation of sufficient capital to create some degree of financial independence, defined as the “ability to support some or all of a desired lifestyle without a paycheck” regardless of age. Who says retirement has to be an “all or nothing” proposition at a designated point in time?  Many predict the new definition of retirement will be an enjoyable transition to a less demanding and less time-consuming career to supplement other sources of non-working income. For example, income from retirement plans and investments and Social Security may support the majority of a desired lifestyle, but perhaps a person is still working for supplemental income to close the gap and to stay mentally engaged and challenged. 

But, just like the GPS in our vehicles, we need benchmarks along the way to validate that we are in fact on route to our desired destination.  The chart below illustrates targeted investment assets to gross pay benchmarks calculated according to age and is generally reliable for a wide range of annual incomes (e.g., $40,000 to $400,000). 

Benchmark by Age of Investment Assets to Gross Income4


Investment Assets to Income


0.2 to 1


0.8 to 1


1.8 to 1


4 to 1


10 to 1


20 to 1


Achieving and maintaining your definition of financial independence is a journey that requires a trustworthy GPS to keep you on course. If we can help, please let us know. Safe travels! 



1 Employee Benefit Research Institute No. 366 (see www.ebri.og Issue Brief) by the Employee Benefit Research Institute, December 2011

2 The Retirement Crisis and a Plan to Solve It, by Chairman Tom Harkin, The Retirement Crisis, see, July 2012

3 2012 Retiree Health Care Costs Estimate, Fidelity Investments

4 Dalton, Gillice & Langdon, (2011). Fundamentals of Financial Planning, 2nd Edition.

    SDWMA in the News:

    Consolidate your 401(k)s. Jeff Acheson give pertinent advice in this Workforce magazine article "The 401(k) Consolidation Conundrum"


    Scott Rain is featured in Bloomberg Daily Tax Reporter BNA Insights this week "Transferring Ownership to an ESOP".

    Please join us in congratulating Jason Lumpkin on a significant achievement. He is a recipient of the Martin Rosenberg Academic Achievement Award from the American Society of Pension Professionals and Actuaries (ASPPA).


    Jeff Acheson Appointed to Government Affairs Committee

    Jeffery A. Acheson, QPFC, AIF®, Partner, Schneider Downs Wealth Management Advisors, LP, was recently appointed to the Government Affairs Committee for the National Association of Plan Advisors, which is a sister association to the American Society of Pension Professionals and Actuaries (ASPPA). The role of the Government Affairs Committee is to interact with various regulatory and legislative entities in Washington DC to educate and persuade on matters important to the association.
    Preparing for DOL Fee-Disclosure Rules - Jeff Acheson is quoted in the latest Human Resouce Online

    Jeff Acheson
    addresses the need for annuity education in Workforce online "Treasury's Lifetime-Income Proposals Lean Heavily on Education"

    "Multiple Employer Plans Can Address Retirementby Jeff Acheson in the current Employee Benefit News  speaks to the challenges of providing lifetime retirement income.

    Jeff Acheson
    promotes full fee disclosure in the article "What the New 401(k) Rules Mean for  You"

    Jeff Acheson weighs in on proposed easing of annuity regulations  in  the Investment News article"Treasury's lifetime-income proposals lean heavy on education"
    Jeff Acheson is interviewed on challenges in the current retirement plan market in this Face to Face article Deadline extended for the new retirement plan - Pittsburgh Post Gazette Business Workshop article by our own Jeff Acheson 

    The October issue of Kiplinger Magazine quotes Jeff Acheson in "Fix Your 401(k)"

    Retirement Plan Advisors becomes SD RETIREMENT PLAN SOLUTIONS Press Release 

    Jeff Acheson discusses 401(k) fees in the Pittsburgh Post Gazette - New Rules Order Thorough Disclosures...

    Retirement Anxiety Ratchets Up for Young Workers - Jeff Acheson quoted in the Chicago Tribune


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