The Boulevard to Financial Independence

I visited my local farmers market on Saturday and was amazed at how much great, farm-fresh produce they have in January (full disclosure: I am in California). It got me thinking about healthy lifestyles and their long-term impact on retirement planning.

At the end of last week, I was talking on the phone with someone who has been using the site (we love to hear what you think about Boulevard R and how we can make it better- you can call us at (888) 412-5837) and they mentioned that the impact health care costs were having on their retirement plan was much more significant than they had anticipated. Today, I met with one of the independent financial advisors on our team and heard something similar- health care costs can blindside consumers in retirement. There is actually a Medigap insurance coverage window once you retire, and if you miss it, later on insurance companies can legally refuse to provide you with insurance.

Something else to consider, if you’re thinking about retiring early (before you turn 65), you’ll need to get some health coverage (a lot of consumers think their company is going to cover their health care expenses in retirement, but companies are increasingly cutting back on these benefits, since it is such a large expense). A basic way to calculate how much this will cost is: $1,500/year for basic coverage and increase that number by 10% for each additional year. And that number is probably if you’ve been going to the farmer’s market a lot and exercising regularly.

So if you’re not already doing it, maybe it’s time indulge in some fresh produce or get on a regular exercise plan (didn’t we just do our new years resolutions?), since another important part of planning for retirement is considering your quality of life for when you don’t have to work any more. Poor health can not only contribute to poor quality of life, but it can also be very expensive. If you miss your Medigap insurance window or don’t insure properly, and you develop a chronic health condition, you could be on the hook for tens of thousands of dollars. Conversely, you may have saved enough, but are unable to travel or do the things you enjoy the most because of poor health. Any way you cut it, in the long term it will pay dividends to spend a little more time taking care of yourself now. As it was said to me while traveling on a train in India “Health is wealth.” Well said indeed.

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Don’t look now, but if you’ve found this blog and haven’t yet been through Boulevard R’s 5-step process, the next logical step is for you to get on the retirement scale and weigh in. Not necessarily a fun proposition.

A lot of people don’t want to put themselves in the position of receiving potentially bad news. Life is hard enough already, so why risk ruining a perfectly good day by a self-inflicted reality check? Maybe, though, the news is good (or at least not as bad as you thought it might be). You may find out that you’re on track to have enough saved to get you to 85 and if you take action now, you’ll be able to afford a 3-week vacation to Europe every two years.

One of the issues we’ve wrestled with here at Boulevard R, is how to constructively return results that are both highly accurate and inspire you to continue (whether improvement means you’ll be able to retire at 59 instead of 65 or that you’ll be on track to have enough money to cover your basic needs in retirement until you’re 87). Retirement is such a delicate issue, since it’s both complex and emotionally charged (a big and sometimes feared unknown).

Another thing we’re trying to figure out is what makes people come to the site? Since we don’t have a lot in the way of PR driving traffic, what makes them click on the search link for Boulevard R? It might just come down to the fact that they’re curious. Curious people who want an answer and some help figuring out what Gallup cites as by far the biggest financial concern for Americans. We think curiosity is a good thing- and so does Seth Godin:

Have any insights about stepping on the scale and why you would or would not want to? Please let us know!

There are many ways to start a company.

The great thing about doing a financial services startup is that you learn so much more about personal finance and best practices.  Boulevard R has been very fortuante to have a couple of great independent financial advisors informing the calculation process.  Another benefit is that through interacting with users and researching the pain in planning for retirement, you get a much better understanding of the issues consumers find challenging and where they would like assistance.

The personal downside of doing a personal finance startup (at least a downside based on how we’re funding the venture) is that now I understand the real opportunity cost of my lost income, since we’re paying ourselves so little.   Since my background is in consumer rights, not personal finance, many of the retirement planning issues we’re addressing are relatively new to me (fortunately we have a great team to create the backend financial model and run tests on them to verify their accuracy).  Saving for retirement and the impact of different financial decisions can be quite complex, but from a calculation standpoint, I’ve really come to appreciate the value of the fundamentals, like how you want to front-load the planning effort when you’re younger to make best use of compound interest.

I wish I could both salt some money away for retirement, as well as make sure Boulevard R stays alive, but right now it’s one or the other.  I guess the success of Boulevard R is my retirement plan.

So instead of having a secure job that pays well and is mildly interesting, I get to do something that I know will ultimately help millions of Americans and address the most pressing personal financial issue of our time.  Low pay and no benefits aren’t a bad trade-off for creative license and getting to do something you’re passionate about.

I’d be really interested in finding out how the startup and small business community perceive the sacrifices they have to make when starting a venture.

Most online calculators focus on a specific event, like retirement, buying a home or college savings.  Boulevard R, however, takes an integrated approach that considers all these factors and does it in a way that is designed to be used on an ongoing basis.  Our goal is to simulate the planning process someone would go through with an independent financial advisor by looking at the bigger financial picutre, since it’s rightly said that “Retirement is the one financial event that you can’t borrow for.”

Nearly all the online tools you’ve ever used have assumptions hard-wired into the calculation that do not allow for adjustments and forecast on a linear basis (assuming the same rate of return year in and year out).  Our approach is based on best practices and is effectively the process you would get if you sat down with an independent financial advisor, so we take into account your income, number of kids, cost of living and also run 1,000 Monte Carlo simulations based on historical market return (which also changes the results, because we run a new calculation with Monte Carlo simulations every time you adjust a variable).  In short, Boulevard R’s engine tries to more realistically simulate all the impacts on retirement calculations (and there are many) than any other tool available and that makes it more sensitive to smaller adjustments.

Boulevard R’s approach to planning for retirement is a lot like sailing from San Francisco to Maui.  You don’t set your course, kick back and then assume you’ll be in Maui in 2 weeks (this is the approach most online planners take).  You have to make course corrections along the way.  One of the the great aspects of the tool is that it models the impacts of different financial decisions or events, so that consumers can make more educated financial decisions.

Boulevard R makes a realistic forecast based on the many different factors, but if you tweak some of them- inflation, for example - you’re going to get a drastically different result, since that % is compounded over many years.

We’re continually working to customize our calculation and improve the user experience to help consumers reach a secure retirement.  Success for us is helping consumers who are not on track to get on track and for those who are on track, we want to help them retire even sooner.  As we talk with users we continue to learn.  We appreciate that there may be better ways to return results, particularly for those who might end up in the “red” and we’re working on ways to do this effectively so that we don’t mislead people and at the same time motivate them to look at some changes they can make to improve their situation.  While we also want to return results that inspire hope, we also have an obligation to be realistic.  If we were just calculating what people need to retire, and not considering their financial goals like buying a home or saving for college, their finances would look a lot better.  But the reality is that those goals have a very significant impact on retirement, since they represent a real opportunity cost.  That’s something that most retirement calculators won’t tell you.

Please keep the feedback coming- support@boulevardr.com