Income Strategies

The Desirement Mortgage

How to save for retirement by treating it like home ownership

by Charlie Epstein, CLU, ChFC, AIF

Mr. Epstein, the401(k) Coach, is a principal of Epstein Financial Group, LLC and Epstien Financial Services,an RIA.

For many people, retirement planning is a subject that invokes guilt, shame, and regret. And with stats like the following, from the Economic Policy Institute, it’s easy to see why:
• Nearly half of all working-age families have no retirement savings at all
• Of those that do have retirement savings, the median amount is only $60,000

Yes, $60,000 is the median retirement savings amount, which is supposed to last for 20+ years. But even worse, almost half of US families have no retirement savings at all.

So the question we have to ask is this: How did all these families get into this situation? Where are the blinders preventing them from seeing this forecastable and avoidable financial snare?

If you’re an employer or a financial advisor, the answers to these questions will affect you as well. As more employers flock to the 401(k) plan as a sustainable retirement strategy over pension plans, one challenge remains: What is the best way to motivate and persuade employees to stay on track with their retirement goals?

While employers and advisors can sing about the benefits of 401(k) plans until the sun goes down, employees have veto power. They can choose to accept this strategy (which is in their best interest) or they can leave their retirement up to chance and hope they come up with some extra cash along the way. But looking at the stats above, most people aren’t finding extra cash anywhere.

Retirement as Home Ownership

So how can we make the retirement planning process feel similar to another transaction they’re familiar with? The answer: The Desirement Mortgage®, which is two things:

  • A strategy to simplify retirement planning using an analogy most employees and clients will understand
  • A phrase that helps employees and clients see the creative possibilities they have to build the retirement they want

With the US homeownership rate at 64.2%, most of your employees or clients will be homeowners, and the rest will probably be at least somewhat familiar with the loan process. That said, during the process of buying a home, it’s important for the homebuyers and the bank to sit down and figure out if the potential buyers actually have the means to pay the agreed monthly mortgage. This is important so the buyers don’t unknowingly accept the terms of a loan they can’t afford and are forced to default.

In a similar fashion, planning for retirement is analogous to the vetting process of buying a home in several ways.
First, before going out to see homes, you would list the “must-have” features in your next home to be clear on what you want. You would do this to have the best chance of finding a home you actually like and enjoy. In a similar way, your clients must first list the amenities and living conditions they really desire for their retirement. Without a vision of what they desire in retirement, many people are effectively leaving their final years up to chance. It’s like choosing a residential property at random and buying it without seeing it.

Second, you would have to figure out your current budget and expenses, so you would know how much house you could afford. Having a definitive price point (one that fits your budget) helps you figure out how to match the desires on your list with the budget you have to work with. In a similar way, your clients have to figure out what their ideal “desirement” will cost them in total, so they can adjust this “price point” up or down to match their listed desires.
Finally, you would have to figure out how much money to put away every month to cover the cost of your mortgage. Once you find a home that you like, you would have to crunch the numbers to definitely determine whether or not the home you chose fits your monthly budget. In a similar way, your employees must figure out what it would cost them on a monthly basis to achieve the “desirement” of their dreams.

So here we have an analogy that resonates with most people because we can see how the esoteric process of retirement planning easily compares to the everyday process of paying a mortgage, which helps to make the issue clear and present.

But have we really solved the problem of poor retirement planning yet? Not really. Although retirement planning is now easier to grasp with this analogy, it’s time to explore the ways you can put The Desirement Mortgage® into practice with your clients and employees.

The Problem with Automatic Retirement Planning

Although I’m a big fan of automatic retirement-planning features such as auto-enrollment, auto-increase, and automatic re-enrollment (and have written extensively on the importance of these features for employers and advisors), there’s a fatal flaw to these automatic features: The employee or client can always stop funding their 401(k).

Companies and advisors cannot legally compel employees to put their money into a 401(k). In the end, the employee must be the one to decide how to plan for retirement.

But the research regarding attitudes towards investing is clear: the average investor falls into the “I don’t know and I don’t want to know” category when it comes to investing. If left to their own devices, average investors would, for the most part, make poor investment choices at the wrong time and lose large amounts of wealth in the process. And in my experience, it has been true that many employees fall into this category.

As financial advisors, we’re regularly exposed to complex financial strategies that aren’t immediately discernable to most of the general public. Therefore, we must teach retirement planning strategies to our employees and clients in a way they can easily understand

It would seem that automatic retirement-planning features fit this audience perfectly. However, instead of seeking out these features in their 401(k) plans, many employees and clients will still stick with the minimum payroll deduction. Ultimately, employees need to be self-motivated and self-willed in their approach towards retirement.
So although automatic retirement planning is definitely important, the real planning action must take place in a more personalized way.

The Desirement Mortgage: A Customized Strategy

I’ve already established how retirement planning is like home ownership, but there’s another point to be made: every mortgage is a little different.

Not every mortgage is the same because there are wide variables in income, savings, interest rates, lender fees, home prices, etc. Each mortgage application requires scrutiny at the individual level. In fact, it would be fiscally stupid to dole out “group mortgages” to people who haven’t been individually vetted for their ability to repay the loan.

Similarly, each individual’s retirement planning is different. There are many variables such as plan options, other savings or investments, health issues, ongoing debts, and ultimate goals that will affect how much money you’ll need in retirement. Yet even though retirement planning is arguably more difficult than buying a home, I would bet that most people who have 401(k) plans haven’t considered a precise end goal for their retirement savings. Having no “number” to reach for a retirement goal is as absurd as “paying whatever I feel like” for a mortgage, having no clue when my house is supposed to be paid off, but still calling myself a homeowner.

So what’s the solution? Demographically-sensitive educational opportunities and one-on-one meetings.

Demographically-Sensitive Educational Opportunities

Retirement planning education can be done in groups or in an individual setting, but more importantly, they must be tailored to the educational and socio-economic needs of your employees.

As financial advisors, we’re regularly exposed to complex financial strategies that aren’t immediately discernable to most of the general public. Therefore, we must teach retirement planning strategies to our employees and clients in a way they can easily understand if we hope to motivate them to start saving and to remain a saver throughout their working lives.
This is in no way meant to be demeaning. In fact, it’s probably more demeaning to offer complex explanations about 401(k) plans and expecting the employee to figure it all out themselves. In my view, it’s the responsibility of the advisor to bridge the gap between the jargon of the trade and a clear presentation of their best options in a way they can grasp.

One-On-One Retirement Planning

I would venture a guess that far too many people in the US simply choose their initial contribution amount to their 401(k) and never think about retirement again until they’re a few years away from it.

One way that I’ve found to keep people from falling into this “I don’t know and I don’t want to know” attitude is to offer one-on-one meetings with plan participants. This type of setting works well because the employee gets a chance to include their personal concerns, goals, and objectives when deciding how to proceed with their monthly contribution amounts. Without having done this, most people are simply shooting in the dark. Having a one-on-one meeting gives a space for the employee to meet with a retirement planner and really get into the specifics of how each monthly contribution affects their overall retirement income.

I’ve used personal gap statements to assist in this process. Personal gap statements are customized scenario breakdowns that show employees how changes to their contribution percentage will affect their monthly paycheck as well as their future retirement income. The real benefit of these statements is that they show the lifetime effect of a decision to change even a single percentage point in their 401(k) contributions at-a-glance. These statements also illuminate the areas where retirement income is forecasted to be inadequate, so there are opportunities to close those gaps by making changes to the contribution amount.

I also use my Desirement Mortgage® Calculator. You can take it for a test drive and also learn how it can be installed on your website here.

Engaged…Without Emotion

When it comes down to it, the real challenge that employers and advisors face is helping employees and clients stay engaged with an emotionless, but predictable, retirement-planning process. When bear markets slash the economy in half, your employees and clients need to remain level-headed and on-track with their predetermined goals.

So whether it’s making the retirement-planning process analogous to home ownership or offering a free one-on-one meeting with your employees to get them onboard with a retirement strategy, the end goal is to win the trust of your employees and clients. And if they understand and believe in the strategy, and can see it with their own eyes, they’re more likely to convince themselves to stay on target when the times get tough.

If you’d like to learn how to communicate to plan sponsors more about our savings crisis, automatic features, their roles as a fiduciary, the Desirement Mortgage® Process, and other strategies for success, you can get a copy of my book Save America, Save: The Secrets of a Successful 401(k) Plan for free (just pay shipping) at You can also learn how to become an author with your version of the book. ◊