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The Best Retirement Planning Analogy I’ve Ever Heard
Meta Description: A retired higher education professional compared DIY retirement planning to repairing a car with advice from YouTube. Here’s why the analogy is so powerful.
The Best Retirement Planning Analogy I’ve Ever Heard
One of my clients recently shared an analogy that perfectly captures a situation I encounter regularly when speaking with TIAA participants approaching retirement.
For privacy purposes, we’ll call him John.
John is intelligent, financially engaged, and accustomed to doing his own research. As he approached retirement, he read articles, watched YouTube videos, visited online forums, and absorbed as much retirement information as he could find.
During the accumulation phase of his career, managing his retirement accounts had felt relatively straightforward. He contributed money, selected investments, and allowed his accounts to grow.
Retirement, however, introduced an entirely different set of decisions.
John now needed to determine:
How to generate reliable retirement income
Which accounts to withdraw from first
Whether to use TIAA lifetime income
How to handle TIAA Traditional
How much investment risk to maintain
How taxes and Required Minimum Distributions would affect his plan
How his decisions would affect his spouse
After several conversations, John ultimately decided to become a client. That was when he shared an analogy that I thought was too good not to pass along.
The Amateur Mechanic Under the Car
In his spare time, John restores cars.
Because his friends know that he is mechanically inclined, he occasionally receives phone calls from people attempting their own vehicle repairs.
The conversation often goes something like this:
A friend calls John while lying underneath a vehicle. The friend has watched several YouTube videos, read some online instructions, purchased the necessary parts, and started the repair.
At some point, however, the friend gets stuck.
He calls John and says, “I think I’m almost there. I just need help with this one final piece.”
John then tries to diagnose the problem over the phone, without seeing the vehicle, examining the work already completed, or fully understanding what may have happened before the call.
Sometimes, after several minutes of discussion, they appear to get the problem resolved.
The friend climbs out from beneath the vehicle, starts the engine, and assumes the repair was successful.
Then he drives the car.
More importantly, he may put his spouse or children in that car and trust that the repair was completed safely.
That is the part John finds difficult to understand.
The person may know just enough to complete the immediate repair, but not enough to recognize another problem created along the way.
A few months later, the phone may ring again.
Something has gone wrong. The vehicle now needs to be taken to a professional shop, and the repair may be more expensive because of damage that could have been prevented.
Retirement Planning Can Work the Same Way
John told me that this is similar to what he sees people doing with their retirement planning.
They have watched videos, read articles, joined online forums, and learned a great deal about their accounts.
They may understand individual concepts such as:
TIAA Traditional
Lifetime income
Transfer Payout Annuities
Required Minimum Distributions
Roth conversions
Investment allocation
Social Security
Withdrawal strategies
They are not uninformed. In fact, many are extremely knowledgeable.
But knowing several individual retirement concepts is not necessarily the same as knowing how all the pieces fit together.
The person may be underneath the proverbial car, midway through the repair, asking an advisor to help with one final question.
The difficulty is that the advisor may not know:
What decisions have already been made
What assumptions are being used
Whether an earlier step was completed correctly
How one recommendation affects the rest of the plan
Whether an important issue has been overlooked entirely
A quick answer may help with the immediate question, but it cannot always confirm that the entire retirement strategy is sound.
The Car Represents Your Retirement
In John’s analogy, the car represents retirement.
Once you retire, you are effectively climbing into that vehicle and trusting it to carry you through the next several decades.
Your retirement income needs to arrive reliably. Your investments need to support your withdrawals. Your tax strategy needs to work. Your TIAA elections need to fit your long-term goals.
Some decisions may also be difficult—or impossible—to reverse.
Your spouse is often riding in the passenger seat. Your children or other beneficiaries may be affected by the decisions you make as well.
That raises an important question:
Are you comfortable driving the retirement vehicle you assembled yourself?
There is nothing inherently wrong with do-it-yourself retirement planning. Some people have the knowledge, experience, temperament, and time to manage it successfully.
The concern arises when someone knows enough to feel confident but not enough to recognize the risks they have overlooked.
Information Is Not the Same as a Retirement Plan
Today, retirement information is everywhere.
You can watch a video explaining TIAA Traditional. You can read an article about Roth conversions. You can use an online calculator to estimate retirement income. You can visit a forum and learn what another retiree decided to do.
All of that information can be valuable.
But retirement planning is not simply a collection of independent answers.
A decision involving one account can affect:
Your taxable income
Medicare premiums
Required Minimum Distributions
Investment risk
Survivor income
Beneficiary planning
Cash-flow flexibility
Future withdrawal options
The challenge is not simply finding information. The challenge is knowing how to apply it to your specific situation and understanding the tradeoffs created by each decision.
Why a Brief Consultation May Not Be Enough
I regularly speak with TIAA participants who have done extensive research and arrive with thoughtful questions.
Often, they want help with one narrow issue:
Should I annuitize this contract?
Which TIAA Traditional account should I use first?
Should I begin a Transfer Payout Annuity?
How should I satisfy my RMD?
Should I roll this account into an IRA?
What investment allocation should I use?
These are reasonable questions.
However, it can be difficult to provide a complete answer during a brief introductory conversation because the correct recommendation may depend on the rest of the retirement plan.
A 30- or 45-minute conversation can provide education and direction. It usually cannot replace a full review of someone’s contracts, income needs, tax situation, investments, estate goals, and family circumstances.
It is similar to asking a mechanic to diagnose a partially completed repair over the phone. The mechanic may be able to help with the immediate issue, but that does not mean the entire vehicle has been inspected.
The Cost of an Irreversible Retirement Mistake
Not every retirement planning mistake results in disaster. Many can be corrected.
Others, however, can be costly or difficult to reverse.
Examples may include:
Electing an unsuitable lifetime income option
Moving money out of a valuable TIAA contract without understanding what is being lost
Beginning withdrawals without considering taxes
Taking too much or too little investment risk
Failing to coordinate income with a spouse
Overlooking the effect of a decision on beneficiaries
Assuming an online rule applies to every TIAA contract
A professional review does not guarantee that every future outcome will unfold exactly as expected.
It can, however, help confirm that the major components have been examined before you climb into the car and begin driving.
DIY Research Still Has Tremendous Value
The point of this analogy is not that people should stop educating themselves.
Quite the opposite.
An informed client is often better prepared to ask useful questions, understand recommendations, and participate in important decisions.
Your research can help you:
Recognize the choices available
Understand basic retirement terminology
Identify questions that need to be answered
Evaluate the advice you receive
Make more confident decisions
The goal is to understand where education ends and comprehensive planning begins.
Watching a repair video can help you understand your vehicle. It does not necessarily make you an experienced mechanic.
In the same way, watching retirement videos can help you understand TIAA. It does not necessarily mean that every component of your retirement strategy has been properly coordinated.
Final Thoughts
John’s analogy stayed with me because it describes retirement planning so well.
You may have spent months researching. You may understand most of the moving parts. You may feel that you only need one final answer to get across the finish line.
But before you climb out from underneath the car, start the engine, and bring your family along for the ride, it may be worth having someone inspect the entire vehicle.
Retirement is too important to rely solely on crossed fingers.
The objective is not simply to get the car moving. It is to build a retirement strategy that is designed to carry you and your family safely through the years ahead.
Frequently Asked Questions
Can I manage my own retirement plan?
Yes. Some individuals have the knowledge, time, and experience to manage their own retirement successfully. The important question is whether you understand how your income, taxes, investments, TIAA contracts, Social Security, and estate goals work together.
Why isn’t a brief financial consultation enough?
A brief consultation may be useful for education or answering a specific question. However, a complete retirement recommendation generally requires a more detailed review of your financial situation, objectives, accounts, contracts, and family circumstances.
What makes TIAA retirement planning complicated?
TIAA participants may own several contract types with different liquidity rules, withdrawal options, crediting rates, and lifetime income features. Decisions involving one contract can affect the flexibility and income available from the others.
Is online retirement information unreliable?
Not necessarily. Online information can be extremely helpful, but it is usually general in nature. The challenge is determining whether that information applies to your particular TIAA contracts, employer plan, tax situation, and retirement goals.
About Greg Shepard
I’m Greg Shepard, founder and creator of TIAA Simplified. I specialize in helping higher education professionals and retirees across the country better understand their TIAA retirement plans and make informed decisions about retirement income.
If you have done the research but want someone to review how all the pieces of your retirement strategy fit together, contact S&A Financial Services to learn more about the planning options available.