Retirement policy statement

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A Retirement Policy Statement (RPS) is a document designed to clearly lay-out your retirement plans, strategies, and the tools which will help you over the next 30 years. It is designed to be a living document which will need to be reviewed and revised regularly as goals change, laws are changed, or new challenges are encountered.

This document was inspired by How to Create a Retirement Policy Statement by Christine Benz, Morningstar, Oct 8, 2021.

Documents
Download the documents here:


 * Morningstar: Retirement Policy Statement, (PDF)
 * Forum member Woodspinner's document template with examples: (Microsoft Word), (PDF)

Benefits

 * 1) Serves as a formal record of our intentions that can be reviewed and revised as needed.
 * 2) Framework for robust discussions on retirement goals, priorities and approaches.
 * 3) Agree on key metrics to monitor retirement feasibility and resilience.
 * 4) Provide clarity into some of the complexities of how retirement is going to work.
 * 5) Layout strategies for dealing with unusual situations like unanticipated major expenses and severe market downturns.
 * 6) Identify key gaps in our understanding that need to be addressed over time.
 * 7) Assist family, friends, or an advisor in understanding our retirement plans, goals and priorities.
 * 8) Integral to a just-in-case-something-bad-happens document and someone else needs to start managing the finances.

Format

 * 1) Focus on clearly describing the concepts and use a format that works for you and your family.
 * 2) Check for understanding and clarify as needed.
 * 3) Consider using graphics, charts or tables to enhance clarity.
 * 4) Regularly review and update the RPS as needed. Document the revisions and the reasoning.

Examples
Guidance for completing WoodSpinner's document template is provided below.

Financial advisors and attorneys
Financial advisor and attorney (if any) contact info.

Goals (priority order)

 * 1) Enter your retirement goals in priority order
 * 2) etc.

Key financial metrics
''Describe or provide links to your key financial metrics. The goal is to help answer the question "Are we on track or do we need to change something?".'' Green -- Metrics in this range are tracking well Yellow -- Metrics raise concerns and closer monitoring is needed Red -- Metrics are significantly off-track and action is required

Cash flow (early retirement)
High level description of your expected income sources, expenses and which accounts (if any) you will draw-down.

Cash flow (middle and late retirement)
High level description of your expected income sources and which accounts (if any) you will draw-down.

Insurance summary
Describe the various insurance policies (home, auto, umbrella, life, whole life, long-term care, etc.).

Current year -- estimated expenses
Adjust as necessary based on your retirement plans.

Estimated future irregular expenses
Adjust as necessary based on your retirement plans.

What to do when expenses aren't tracking to the plan
Describe possible solutions to consider if expenses aren't tracking to the plan.

Social Security claiming strategy
Describe your Social Security claiming strategy. Consider:


 * 1) Estimated payouts
 * 2) Links to SS earnings history
 * 3) Tools used
 * 4) What would make you change this approach

Charitable giving
Describe your approach for charitable giving in the various phases of retirement. Consider:


 * 1) Process for determining a target giving amount
 * 2) Selection criteria for charities
 * 3) Who is involved in selecting charities and donation amounts
 * 4) Types of donations:
 * 5) * Donor advised funds (DAFs)
 * 6) * Qualified charitable distributions (QCDs)
 * 7) * Direct donations via cash or securities
 * 8) Charitable organizations as beneficiaries of various accounts

Roth conversion approach
Describe (if any) your plans for Roth conversions. Consider:


 * 1) Roth conversion goals (prioritized order)
 * 2) Who are you optimizing for (both of you, one of you, or your beneficiaries), (prioritized order)
 * 3) Timeline for planning and execution
 * 4) Determining a target conversion for the year
 * 5) Types of conversions (in-kind or cash)
 * 6) How will you pay the taxes?

Required Minimum Distributions
Describe (if any) your plans for Required Minimum Distributions (RMDs). Consider:


 * 1) What accounts are subject to RMDs
 * 2) Timeline for planning and execution
 * 3) Determine RMD requirements
 * 4) Determine which accounts to use to satisfy RMDs
 * 5) Types of RMDs (in-kind or cash)
 * 6) How will you pay the taxes?

Competency
Use this section to describe how you want others (e.g. spouse, children or friends) to monitor for warning signs and raise any issues. Consider:


 * 1) How you want issues to be raised
 * 2) Financial warning signs
 * 3) Cognitive impairment signs
 * 4) What to do if I am incapacitated or pass

Investment Policy Statement
Describe or provide links to your Investment Policy Statement. Consider:


 * 1) Portfolio strategy
 * 2) Risk tolerance
 * 3) Investment philosophy
 * 4) Asset allocations targets
 * 5) Asset location rargets
 * 6) Rebalancing approach

Estate planning summary
Describe or provide links to your estate planning documents. Consider:


 * 1) Key estate planning documents
 * 2) * Will
 * 3) * Trusts
 * 4) * Health care directives
 * 5) * PoA for finances
 * 6) * Final arrangements
 * 7) * Information for caregivers and survivors
 * 8) Beneficiaries for each account
 * 9) Gift tax history (IRS Form 709)
 * 10) Claiming portability (IRS Form 706)

Appendix 1 -- Yearly retirement to-do list
Add and adjust per your own retirement plans and approaches.

Appendix 2 -- Important milestones for retirement planning
See Checklist of important retirement dates for the full list. Consider adding these additional rows if applicable.

Appendix 3 -- Modeling
Describe the modeling and tools used to plan your retirement.

Key assumptions:


 * Equity growth rate, equity growth standard deviation
 * Fixed income rates, fixed income standard deviation
 * Her SS start/amount, his SS start/amount
 * Inflation, tax rates
 * Expenses, etc.

Deterministic models
Describe the deterministic analysis (e.g. Excel spreadsheets) and key results.

Probabilistic models
Describe the probabilistic analysis completed and key results.

Appendix 4 -- Rebalancing
See: Rebalancing

Appendix 5 -- Useful tools
Feel free to modify this list based on your own preferred tool set.

Appendix 6 -- Key decisions
**Watchpoints are signs that would make you reconsider a decision that has been finalized.

Optional sections
''Consider moving the following sections to their own document and provided links in the RPS. This will reduce the size of the RPS, make it easier to review, and reduce the changes required to keep it up to date:''


 * 1) Investment Policy Statement (IPS)
 * 2) Estate planning documents
 * 3) Key financial metrics

= External links =