Values Based Retirement Planning: What You Need to Know

Values-based retirement planning puts who you are and what you care about first. Like traditional retirement planning, the desired outcome is a secure future, but values-based planning prioritizes alignment of your values, goals, and actions to help you create a retirement that is successful and fulfilling.

As a Behavioral Financial Advisor, I whole-heartedly believe that values-based retirement planning is the best way to ensure that you can live the rest of your life in a way that is true to you.

What is values-based retirement planning?

Values-based planning is more about who you are as a person and what sort of legacy you are going to create than the amount of money you have and how much you want to spend. It’s about giving heart and soul to your money by aligning your financial decisions with your core beliefs and long-term goals.

Of course, values-based planning still aims to create a successful retirement, one in which you don’t run out of money. But very few, if any, retirees would consider simply having enough money until the day they died fulfilling.

My goal in values-based planning is to help my client create a retirement filled with the people, experiences, places, and things they care about most in a way that matches their financial situation. I want them to have the freedom to enjoy life to the fullest without worrying about whether they have enough money.

The first step to a successful retirement: Identifying your goals

You can’t know whether you will have enough money to meet your goals in retirement unless you know what those goals are and how much it will cost to attain them. If you’re planning to make the most of your retirement, it makes sense to start with your life goals instead of an arbitrary financial target.

I like to take it one step further. Instead of starting with a goal, for example, “I want to move to Florida,” I prefer to begin by first understanding what motivates that goal. This is where your values come into play.

Knowing your values helps you set the right retirement goals

Each person’s values can be vastly different and understanding yours and your partner’s is crucial in creating a values-based plan. Some common values that influence retirement goals include family, faith, financial security, philanthropy, and health.

As a Behavioral Financial Advisor, I follow the alignment model, which is making sure that your values, goals, and actions are always in alignment with each other. When I help my clients envision their retirement, I strive to really get to know them and help them dig deeper into their own needs and desires so they can create the retirement they truly want – not what they’re told they should want or assume they need.

Going back to my previous example, if your goal in retirement is to move to Florida, I can help you make it happen. However, what I really want to explore is why you want to move to Florida in the first place. What’s your passion? What makes you tick? What truly matters to you more than anything else in the world?

Exploring your values gives context to your goals and may offer insights that change your goals altogether. You may want to retire to Florida because it means you never need to shovel snow again. But moving to Florida isn’t the only way to avoid this dreaded winter maintenance, so let’s look at the other values in play:

• Family: If your family is here in the Berkshires, maybe the solution isn’t to move to Florida. You may opt to move into a managed apartment or condo building instead, so you can still see your grandkids twice a week while someone else deals with winter snow removal.
• Community: You’ve been volunteering for the same arts organization every summer for 10 years and attending the same church since 1985, and while you never want to see another winter, you don’t want to give up your vibrant social life. In that case, you may become a snowbird, flying south to a Florida rental each summer and returning home to the Berkshires for the cultural season you love so much.
• Enjoying the outdoors: A move to Florida would make it possible for you to walk and cycle year-round without worrying about ice or snow, but in the summertime, the Sunshine State’s heat and humidity will keep you indoors. A move to central or northern California might be a better bet!
• Harmony: Your spouse is set on staying put. Perhaps it’s just time to hire the neighbor’s kid to shovel your sidewalks and maybe plan for an annual winter vacation.

Choose your own goals – not someone else’s!

There’s a lot of advice out there about what you should be planning for in retirement. My advice to you is this: no one piece of retirement advice is going to apply to all people. The rules of your retirement will be different from those of someone with other dreams or different resources. In fact, many retirees are playing a separate game altogether.

Instead, live your life and plan your retirement based on your own values and circumstances. If you value family, you may spend more time looking after your grandkids than pursuing hobbies. If you prioritize philanthropy, you may be spending more of your budget giving back than your buddies at the club. If you prefer a simple life, you may be retiring with a lot less money than “they” say you should. None of these retirements fits the generalized advice you’ll read online because no one else is living your life and following your values. And that’s nothing to be ashamed of.

Factors to Consider When Planning for Retirement

Values-based planning focuses on the emotional side of retirement. To have a successful retirement, one in which you have the means to live your values and achieve your goals, you still need to consider the more practical, numbers-based side of the equation.

• Timeline: When do you plan to retire? Your retirement timeline can significantly influence how you save and invest. For example, if you plan to retire early, you might need a more aggressive savings strategy than if you plan to enter partial retirement at 70.
• Spending Needs: Saving money and deciding how to spend money are two very different skills. Assess your living expenses and how they might change in retirement including factors like travel, healthcare, and hobbies. Check in with your values to make sure your spending stays in alignment.
• After-Tax Rate of Investment Returns: Understand how taxes will impact your investment returns and adjust your strategy accordingly. Tax planning can help maximize your after-tax income and do more with your retirement savings.
• Asset Risk Tolerance: Your risk tolerance will affect how you invest your money and how you respond to market fluctuations. Some investors may choose to accept more risk in their portfolios to avoid supporting business practices that don’t align with their values (ESG investing). Others who value financial security invest in any business as long it provides favorable returns. Be sure to share your values with your financial advisor.
• Estate Planning: If you don’t have an estate plan, someone else will make decisions for you about end-of-life care, funeral arrangements, inheritances, and philanthropic giving. Having a plan in places allows you to create a legacy that aligns with your values, ensuring that your life’s work benefits the people and causes that matter most to you even after you’re gone.

Questions to Ask About Retirement Planning

1. Am I on track to meet my goals?

Regularly review your financial plan – at home or with your advisor – to ensure you’re on the right path to achieving your retirement goals. It’s important to adjust your plan as your values and circumstances change over time so you can be confident that you’re still headed in the right direction – no matter what life sends your way.

2. When should my spouse and I take Social Security?

When you claim your Social Security benefits can significantly impact your retirement income and can have long-term tax ramifications. Consider your overall financial situation, life expectancy, and plans such as early retirement or partial retirement while being mindful of how this will impact your current and future tax obligations.

3. What adjustments should I make to my investment strategy?

As your values and goals evolve, so should your investment strategy. Regularly assess your portfolio to ensure it aligns with your current values and financial objectives.

4. What are my core values?

Identifying your core values is crucial for values-based retirement planning. Reflect on what matters most to you and how you want to reflect those values in your retirement. Some of the most common core values that come up in financial planning include:

• Family
• Faith
• Happiness
• Community
• Security
• Freedom
• Health
• Philanthropy
• Peace of mind

How do my values and goals match my resources?

It’s essential to balance your values and goals with your financial resources. Your advisor can help you determine what’s feasible and adjust your plan accordingly. For example, if you value family experiences but have limited means, you might opt for more affordable family gatherings rather than extravagant trips. Or if you value philanthropy but worry about running out of funds, you can plan to give less today and focus on strategic giving instead.

The importance of a trusted advisor

As in traditional retirement planning, having a trusted advisor who understands your values and goals is invaluable. They can help you navigate the complexities of retirement planning, ensuring your financial strategy aligns with your personal beliefs. A good advisor will listen without judgment, respect your unique perspective, and help you create a plan that honors your values.

Get started with values-based retirement planning

Are you ready to start building a fulfilling retirement? I invite you to schedule a free, 15-minute, zero-commitment phone call with me or one of my colleagues to tell us where you are today and where you really want to be.