Below is a link to a recent Wall Street Journal article illustrating the importance of long term goals towards financial independence. Secure retirement is less related to how much you currently earn and more related to saving for retirement, how long you work, and your current and future spending habits. How investments are allocated also matters, particularly near and during retirement, and sometimes not in the way one might suspect.
The article’s graph highlights an example of a new retiree pulling all their investments out of the market and into bonds in 2000, the same year he/she begins a retirement withdrawal rate of 4% and inflating that amount annually by 3% for estimated cost of living increases. The result is a ZERO percent chance of long term success. This is because inflation eats away at a 100% fixed income portfolio. So as much as some shudder at the market (just as they did in 2001 and 2008) it is important to keep a long term perspective regarding your investments. This is why we spend the time we do with clients on investment allocation, rather than reacting to volatility with short term responses that are either bullish or bearish. This article highlights the importance of flexibility before and during retirement.
I encourage some clients to adjust their perception away from spending and towards saving by shifting thoughts from what they don’t have towards what they do have (gratitude), and practice the exercise of separating needs vs. wants. Americans who are on track with their long term plan understand that flexibility before and during retirement is an important factor. If your plan includes knowing the difference between needs and wants, if you have built into your plan the ability to tighten up if needed, and if you maintain a pattern of saving appropriately, you stand a good chance of success.
This season is a good time to focus on gratitude, isn’t it? My family has a tradition of sharing gratitude at the Thanksgiving table, one by one. With at least 9 attending this year (10 counting our new baby grandson), we will need to start early, or our turkey dinner will get cold. And of course, all holidays requires some flexibility.
One thing I am thankful for is the opportunity to work with our wonderful clients. I thank each of you for placing your trust in us. I wish you all a blessed Thanksgiving and a few quiet moments of personal reflection.