The Blue Blaze

Four Lessons Hiking Can Teach You About Retirement Planning

Posted by Frankie Corrado


There’s a famous saying that if you fail to plan, then you’re planning to fail. Though the importance of planning for retirement seems pretty obvious, many people neglect it or don’t put the necessary time into the process.

The funny thing is, people put plenty of time into planning other events in their lives, whether it’s a vacation, wedding, or birthday party.

But you can easily apply the same principles you use to make other plans to retirement.

As an outdoorsman, I’ve taken several hiking adventures and I’ve found that climbing a summit contains many parallels to helping my clients plan their retirement. Whether it’s budgeting for the trip or dealing with challenges on the trail, the two are pretty similar.

So join me on this adventure as I share four lessons hiking can teach you about retirement planning.

Measure your probability of success

Once you have a goal in life—whether it’s to climb a mountain or enjoy your retirement—you need to have a plan to reach it. Though the endgame may be different, the process to reach it is the same.

When I decided to climb Mount Washington — the highest peak in New Hampshire — I didn’t just pack up the car with hiking equipment and drive north one day. I had to plan ahead — that is if I was planning on surviving the climb!

I had to take several factors into account. I had to figure out how much it was going to cost me to get to New Hampshire, how long the hike would take, what equipment I would need, whether or not to hire a guide, and whether I was even mentally and physically prepared for the climb.

I also had to consider the conditions. It was winter so not only was it cold, but the sun sets earlier so I had to make sure I completed the ascent and got back down before dark.

By planning ahead, I was able to account for several factors and increase the probability of a successful hike. It’s the same with your retirement.

I have a number of clients who are on the “cusp” of retirement. They are just about there. So like me getting ready for my climb, we want to plan this very important journey.

The first step is to pull out the “map” - what does the ideal retirement looking like? How much is it going to cost in real dollar terms? Many of our clients utilize a cash flow tracking tool we have available and have the ability to get a broad “I spend $X each year” all the way down to a categorical and transactional level. While it is easier to get “ballpark” amounts, if you wanted to make adjustments to expenses you know will or will not occur in retirement, this gives you the ability to accurately estimate what the expenses will be that we are planning for.

If the client wants to retire at 60 and expects to live to 100, that’s a 40-year time horizon. We’ll build a portfolio based on how much they’ll need to take out of their savings each year of their retirement, increasing it by inflation or any other specified planning goals. The client may plan to downsize their home when they reach 75 and move to sunny Florida. This planning technique would infuse additional cash into their portfolio that they can use in retirement. We include all of these specifications and planning areas into the broader retirement plan.  

Track your progress against what you planned

Retirement is a long-distance hike so as you plan it, you should track your progress to see if you’re still on pace to meet your goal.

When I hiked the Appalachian Trail — a 2,190-mile trek from Georgia to Maine — I knew I had to finish it by mid October. The trail ends at Mount Katahdin in Maine, and camping isn’t allowed in the park after Oct. 15, so I knew I had to be on pace to finish by then.

I was tracking my progress and at one point realized I was behind schedule, so I had to pick up my pace. I had to make adjustments in my plan, which meant spending less time in a town or hiking on a day I wanted to rest in order to make up time.

By knowing where I was in relation to the plan, I had to act differently.

It’s the same with retirement planning. You track and monitor your plan. If your retirement portfolio is on pace, then no changes are required. But if you’re nearing retirement and you realize you’re behind, you may need to do things to catch up.

But on the flip side, tracking your progress can show if you’re ahead of schedule. That’s a good place to be because it creates more possibilities. You may be able to increase your spending in retirement, take that dream vacation, or start a formal family gifting plan. But you won’t know these things if you’re not tracking your progress.

As financial life guides, we have a few tools at our disposal to effectively track our clients’ plans year after year to see if they’re on pace, ahead of schedule or behind. One of those is the Monte Carlo simulations, which build out models of possible market results that are based on the client’s actual portfolio. Another proprietary tool we use, (which I think is even better than Monte Carlo) is called Critical Path. It takes the client’s original set of retirement goals and tracks the client's actual progress against it.

Retirement is not a destination, it’s a journey

The goal of retirement shouldn’t simply be to “not run out of money” before you die. That’s a sad mindset that robs people of the wonderful opportunities retirement presents. It’s what I call a destination mindset, as opposed to a journey mindset.

Isn’t a better question, “What do I have to do to enjoy this journey I have ahead?”

When I hike my ultimate goal is usually to get to the top of a mountain, but I also want to have an amazing experience on the journey. Along the way, I set smaller, daily goals en route to the destination. I want to make sure I have the time to see that secret waterfall.

It’s the same thing when planning your retirement. Don’t just think of how much money you’ll need to survive. Set your mind on how you want to live and set goals along the way.

Maybe you want to take a European vacation, or maybe you want season tickets for your favorite sports team. Think of your retirement as a series of bucket list items to check off. It gives you a broader and more meaningful perspective of retirement planning. People usually think, “oh - I can’t afford that” and drop the dream altogether. Who knows - maybe you can. You just have to decide if that is truly what you want. Usually I find that you can make it work.

Be ready for factors outside your control

One thing I learned about hiking is to expect the unexpected. Whether it’s a sudden thunderstorm or encountering a bear or snake, the great outdoors will make you adjust your plan — quickly!

When I was hiking in Vermont, Hurricane Irene landed and washed away a section of the trail. I had to take a few days off to wait for the storm to pass and adjust my route since part of the trail was closed.

The lesson there: Always have a Plan B and be ready to adjust.

The same goes for retirement planning. The future is unknown. You can’t predict a health incident, a family crisis, or a stock market crash. You can get sidetracked by life’s storms, so you have to be prepared to weather the storms when they come.

Health care is a major concern for retirement and having a health incident can have substantial financial implications. One of the best ways to offset this type of storm is with a Health Savings Account (HSA).

Say you’re 50 and plan to work 10 more years and you’re saving in an HSA. If you’re married (and your insurance is a high deductible policy), you can save up to $6,750 a year—and $7,750 once you’re 55 into an HSA. So that’s $6,750 a year for five years and up to $7,750 for the other five years. That’s $72,500 of savings plus you get a tax deduction for it! If you contributed the amount I listed above, that would also net you about $18k of tax savings. So when you retire, you have this cushion you can use for unexpected costs that won’t derail the rest of your retirement plan.

Your retirement plan can’t be set in stone. You’ll need to make adjustments along the way. That’s fine. Just make sure you build flexibility into your plan so you’re not helpless when “life” happens.

Not sure how to do that? A financial life guide can help. Get started with a free virtual consultation with one of our financial life guides. Sign up here.

Free Virtual Consultation

Topics: Retirement