The Four Pillars of Retirement

By Author and Financial Planner Wayne von Borstel

Drazen Zigic

Portland, Oregon-based author, and independent financial planner Wayne von Borstel wants to help people retire with comfort and security. Many people do not have savings and are not putting money away for the future. von Borstel suggests that delayed gratification and avoiding the need to have the next, best things in life make it far easier to have a good retirement with fewer worries.

“In order to get to that point,” says Wayne von Borstel, “people need to intentionally have four specific goals,” which he calls the four pillars of retirement. By following his method and focusing on the seriousness of addressing financial concerns way before nearing retirement, many more people will have the option to choose their retirement lifestyle. Below is what he recommends to have financial security in retirement.

Pillar 1: Emergency Fund

The idea of having a safety net is not new. It is also one of the areas that a lot of people ignore or avoid. Either they do not have the money to set aside or are not intentional about having long-term financial success. Or they decide to spend that money another way instead of hanging onto it for the proverbial rainy day when something goes wrong.

Wayne von Borstel knows that it can be challenging to put money aside, but even a modest safety net can help. Ideally, von Borstel recommends that people have an emergency fund equal to 6 months of living expenses. However, even a few thousand dollars can help when an emergency comes. Saving something is always better than saving nothing, and delayed gratification is one of the ways von Borstel suggests to help create cash reserves.

Pillar 2: Conservative Bucket

It’s tempting to select the highest-risk category for a portfolio with the idea of seeing greater returns; it can also be risky. If the markets take a sudden downturn, people with only high-risk investments can find that they are losing too much of their retirement. Putting a portion of the portfolio in lower-risk investments, such as bonds, can make it much easier to weather economic storms and address financial issues as they come. Being too conservative may not get people where they want, principally if they cannot save as much as they would like or start a little later in life. But using a percentage of their portfolios in conservative assets is a hedge against significant market downturns, says Wayne von Borstel, because it protects those who have already retired or are close to retirement financially. We should have five years of what we need out of your portfolios to live on in a conservative bucket because it protects us from that inevitable downturn in markets.

Pillar 3: Capacity to live off of 3% of Portfolio

Setting a realistic goal for retirement is another area Wayne von Borstel is deeply passionate about. Anyone who plans to retire should consider how much they need. The goal is to have enough to enjoy retirement and not be worried about our lifestyle, but that means different things to different people. Getting by with Social Security and a little investment is enough for some. Other people want much more than that and will need to save more. Usually, it’s best to calculate the money needed for retirement and then plan to save more than you think you might need because of the rising cost of inflation and living longer. Running out of money in retirement would be upsetting and could put the elderly at risk of homelessness, food insecurity, and other problems. These issues are not what people in their retirement years want to worry about, and retirement planning reduces the risk of struggling once we get there. We should have the capacity to live on less than 3% of our financial assets.

Pillar 4: Zero Debt

Not having debt in retirement is another noteworthy point von Borstel makes. If a person gets to retirement age with a house payment, a car payment, and credit card debt, for example, it can be difficult for that person to have enough money. Your cash flow is eaten by credit card and bank profits. The less debt the person has when they retire, the more their retirement will be safer from inflation and life events. If they do not have much saved, it will be easier if there is no need to spend a lot on debt which hopefully would keep them secure and able to cover their food and housing expenses for the long term.

Some people still have a house payment when they retire or purchase a new vehicle. Those kinds of debts can work in retirement but whether they are good ideas depends on the person, how much they have saved, and how large the debt is. For most people, having no debt is the best and safest way to protect their financial future. Having debt can put them at too much risk, especially if they do not have a significant amount saved.

About Wayne von Borstel

Wayne von Borstel is the president and founder of von Borstel and Associates. This financial services planning firm has offices in both Portland and The Dalles, Oregon serving clients all around the country. von Borstel is the author of the Truth Project: Finding the Courage to Ignore Wall Street. He holds a Master’s degree in financial services (MSFS) from the graduate school of financial services at the American College and is a Certified Financial Planner.

Investment advisory services are offered through von Borstel Associates Inc., an SEC registered investment advisor.