Often the second step in a client's financial plan is their retirement planning. Each client faces a time in their life where they will be a need to derive income from another source than a profession. The earlier one prepares for this eventuality the more it will reduce the cost, both mentally and financially. A client's future cash flow will depend on a multitude of factors, some not known for years to come. However even taking their current expenditures and increasing them by an average inflation rate is often very eye opening to the amounts one must save to reach a certain goal.
During the retirement planning process, TCM demonstrates to the client the need for a defined and quantifiable risk tolerance that covers not only their ability and willingness to take risk, but also their need. Whether a client is willing to take risk is not as important as to the reason why. For example, if the client has a firm foundation in statistics, finance, portfolio creation and years of experience in the field, higher risk tolerances can be justified. Trying to reduce or continue a sub-par savings amount by substituting riskier asset classes is not a justification for higher risk tolerance.
Once the risk tolerance and target rates of return are established a suggested asset allocation for the client's retirement assets are suggested and compared to their current holdings. Recommendations are made on 14 asset classes, during the retirement build up and drawdown stages. If a shortfall is identified the client is presented options to close gap either partially or entirely.