Poised For A Fall?

Each week it seems that the markets can't get any higher and yet they do. Math would suggest that a period of such increases can only be followed by a period of decline. 

While it's true that markets go down but don't stay down, in a balanced world then the opposite may also be true: markets go up but they don't stay up. 

These factors will come as a surprise to almost no one. To a great extent they are the rules of simple math and probability. But, the fact that they go up but don't stay up and that they go down but don't stay down isn't the point. 

The point is at what cost?

And no I'm not looking for a answer like, "it went down 355 points" or "it went down 13.5%" No. 

 Photo by  Rob Potter  on  Unsplash

Photo by Rob Potter on Unsplash

The answer I'm looking for is: How much did the decline (when it comes) cost you in your progress towards you goals and objectives?"

Will you have to work a few years longer? Cut some planned "extra" expenditures that you'd put on the calendar when things were better? Maybe rethink starting dates for Social Security or whether or not to take that lump-sum distribution and roll it over or, leave it and take a monthly pension distribution instead?

These questions should surpise no one either, but they always do. And they do because as a general rule most people have no plan. And, if you have none, then it would be hard for it to be impacted by changes wouldn't it. 

Sure intuitively you may sense that there's an issue but you can't really quantify it, or name it's solution in any real way.

It's almost ironically like the Halloween corn maze, you know you're going to go in, your certain you're going to come out and it's going to be confusing and scary and uncertain in-between those two points.

Your life is not a corn maze, you can do better than that. Uncertainty can be fun in many things. I'll bet your financial security isn't one of them. 

Don't just sit there, do something. 

"Put me in Coach......!"

Conventional wisdom may have caught up a while back, but conventional implementation is now just beginning to take hold of a fact that the professional community has known for a long time....

"Success in retirement is about a lot more than money."

When we leave the workforce after so many years we leave behind more than just a paycheck. To a large extent, the fabric of our very lives is disrupted and cutoff. The daily routine we'd followed for decades is now rendered all but useless. 

Connections are lost, relationships cast aside and even where they do remain, many we find sadly, were bound by the commonality of our job, careers and associates. 

 Photo by  NeONBRAND  on  Unsplash

Photo by NeONBRAND on Unsplash

How do we fill these voids. How do we remain relevant in our own eyes and in the eyes of others. While retirement may or may not be filled with money and wealth (for many it will not) we need to examine closely (and hopefully in advance) that there is much more to "success" in retirement than what's on our balance sheet. 

Here's a great article on how the world is starting to wake up to the fact that you can design your life in many ways rather than taking what it hands you. 

 

 

Retirement Lost

In nearly 40 years of private practice, I've interviewed very few prospective Client's who's view on retirement and how that's all gonna work out is even close to being accurate. 

Retirement planning is complicated in and of itself. It becomes more complicated with the pressure of being in "distribution mode" as opposed to a lifetime of "accumulation mode." Look when you were building your nest egg harrowing markets didn't bother you all that much because you were still making money. Well, that changes when you're living off your nest egg and employment is well into the rearview mirror. 

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Prudential makes a good point in their most recent commercial that you should be focusing on how long you might live not how long you think you'll live. With the advent of increasingly effective medical technology, many, many of us will leave the typical mortality ages in the rearview mirror by a pretty fair amount. 

The mathematics of how retirement will likely play out are daunting and not something that a typical pre-retiree or retiree is in a good position to calculate. And missing the math might scuttle an otherwise rewarding retirement. 

Am I pitching you to seek advice? Well sure I am because advice when done right works. 

Will you have to pay for the advice, of course you will. But unbeknownst to you, you already are you just haven't figured out why or how. 

Here's some help in that regard. Then take your savings and get some real planning done. It may be the most important step you take. 

Winning the Losers Gane

Sorry can't take credit for the title to this blog, it belongs to Investment Guru Charles D. Ellis and is the title to one of the best books on investing ever written.

That book squares up pretty well with one of my favorite blog posts that came up on todays read list. "Why Can't "Winning" Active Managers Keep on Winning"

If you invest, no matter if you invest on your own for your own account, or you have an advisor, banker or insurance broker that invests for you, both of these pieces should be a must read and for good reason. 

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The quest to find a strategy or person that will beat the market is a failed attempt from the start. Frankly, if you're investing for yourself, I'd question that as a strategy as well. If the typical mutual fund manager, with almost unlimited funds and access to data and research the likes of which you'll never see as an individual investor can't consistently beat the market, the fact that you're going to based on data you cobble together when you're not doing your day job seems pretty unlikely frankly. I mean seriously, look at the math. 

The good news is that if you're investing for yourself you won't fire yourself and you'll make obtuse excuses for your failure, one of which is that at least you're not paying for the losses. But you are actually paying for it, sure, it's a debit to your net worth that you'll never actually calculate and good thing because that number would make you sick. 

There are more proven methodologies you just have to find them. 

Advice Is Advice Until It Isn't

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A recent study shows that 53% of employees receive no investment advice about how to allocate the money that they contribute to their 401k plan. 

What we know to be true is that independent research as well as academic research in both the investment industry as well as in the area of behavioral finance, is that left to their own device, people make horrible investment decisions. 

For many, your company retirement plan is your sole means of investing. (That's a problem in and of itself, but that's a topic for another blog post at a later date and time.)

Here's what's likely to happen:

  • Market timing; you'll move money in and out of markets trying to beat professionals at a game that you really don't understand. Odds are great that you'll fail at this attempt, though the temptation of psychic comfort will hard to avoid
  • Concentration: not the good kind, as in working with focus, the kind where your money is nested in a singular investment or worse, in your company stock. Ask the folks at Enron how that worked out for them
  • Not engaging a Fiduciary as your partner: Fiduciary's are required to protect your best interest above all others; everyone else? Well they're typically out for a commission win at some point and likely sooner rather than later
  • Saving too little or saving too much: Yes, that's right, saving too much! There I said it. The reality is that you'll walk away from work before your age 70 and 1/2 which means you better have some non-retirement dollars to draw on to get you by. The government doesn't require you to take IRA or other distributions until that magic 70 1/2 age so if you have to take them earlier, congratulations you're now voluntarily paying taxes. If you do that, run the risk of giving back the bulk of the tax savings you had banked over a lifetime of making your plan deposits. Consider capping your contribution to the amount that you'll need to get your employer match and putting the difference in a tax efficient personal portfolio. That's the bridge that will get you from retirement to age 70 1/2 when your required to begin taking retirement withdrawals.

Bottom line is that saving for a rainy day is a good strategy, been around for a long time. 

But, that doesn't bely the fact that there's still a great way, a good way and horrible way to do that and you should find yours. The results will matter. A lot. 

 

I'll Get By Without A Plan

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Yes you will. 

You'll get by. 

But what you have to ask yourself at every point is was that your intention? To get by?

It's easier not to have to answer the tough questions. It's easier not to have to keep score. 

Going it alone makes getting by seem pretty easy. 

But when in your life has inattentiveness and winging can it ever be truly been "optimal."

If you're not focused on "optimal" then you're not focused. 

Maybe it's time for you to start.