Inflection points are places in life where our direction can change—sometime dramatically and sometimes only slightly. Even small changes at an inflection point can eventually accumulate into a significant difference over a long enough period.

Where you are today is, in part, a function of your decisions at life’s inflection points.

Retirement is an inflection point. Small changes in your trajectory at the beginning of your retirement years will be magnified over time. To successfully manage the financial part of retirement requires that you consciously reconcile three things: your balance sheet, goals and fears.

By the time you see the retirement light at the end of the career tunnel your balance sheet is fairly well established. Your 401(k) and bank accounts are worth whatever they are worth.

Ideally you won’t have any debt as you approach retirement, but ideally you exercise every day, too.

The goals part of the retirement process is a lot like the balance sheet; it can be expressed numerically. You want to live a certain lifestyle in retirement and that requires a certain amount of money.

There’s your goal.

How does that number reconcile to your balance sheet?

This requires making some estimates and assumptions. Social Security income, inflation, life expectancy…some assumptions are easier to make than others. With this collection of assumptions, you can determine what sort of investment return your assets must generate so that your life is reasonably expected to run out before your money does.

Anyone with a calculator can calculate a required rate of return that should reconcile those two. The math of this process is as simple as the answer is sometimes troublesome.

If you only need to earn two percent annually, you are both fortunate and rare.

Most people need to earn a return that, unlike a two percent required return, requires them to introduce risk into their portfolio. This also introduces the third leg of this reconciliation balancing act: fear.

How do you define risk? How do you react to volatility? What most frightens you about retirement: financial things or something else?

This may require reducing your expected standard of living in retirement. Can you realistically commit to a level of spending that your assets will support, even if it differs significantly from what you are used to?

You may not know until you try. And that can create fear.

So can having a bunch of money in the stock market, especially when you are no longer adding to your retirement assets.

I’ve seen advisers grossly misadvise people about asset allocation or expected rates of return, usually in an attempt to impress a would-be client. Approaching retirement is not the type of inflection point at which you want to be overly optimistic.

And you certainly don’t want to be downright silly, like assuming the incredible stock returns of the past five years will continue for the next 20.

Proper planning for an impending retirement cannot be reduced to a formula, nor should it be attempted with wishes and hopes. For most people, it is a constantly shifting balancing act between science and art.