I want to share one of the most valuable pieces of retirement advice that I’ve ever heard. If you’re thinking about your retirement and wondering if you’re doing the right thing, or think that you should be doing something different, or if you’re just worried about all the things going on right now – whether it’s the economy, the markets, or the value of your accounts – I’m going to share the retirement truths that every retiree goes through.
The negative of these retirement truths that we’re going to look at is that many of them lead to increased uncertainty or worry about your retirement. One of our goals is really the opposite of uncertainty or worry in retirement. It really should be more about confidence, right? The next years, really all the way up until you pass away, are the magic years. These could be the best years of your life, and I know that because there’s an actual study proving this. People were asked to score their life satisfaction from 0 to 10, where 10 is the best possible life and then 0 is the worst possible life. I thought it was encouraging to see that life satisfaction tends to increase as we get older.
In retirement, it will be common to think: should I be doing something different? It’s normal to feel this way in retirement especially when you see the news, or listening to friends talk about their finances. There’s this feeling of doubt about our current plan, which causes some people to make more emotional decisions instead of making smart financial decisions. A good way to avoid this feeling is by having an understanding of your plan, which leads to more confidence with what you’re doing. Specifically, having a plan for both the good and bad market times so that you know you’re prepared for either one.
Now onto the second thing that comes up in retirement – we need to expect bear markets. You’ve most likely lived through a lot of them already, but in retirement they feel a little bit different. Creating a plan with bear markets in mind and really big corrections built into the plan is a smart thing to do. That way you don’t have to worry when they eventually come. Now, if you’re not sure how to model these various what-if scenarios or bad market scenarios for your plan, then you may want to talk to a CFP or check out my favorite retirement income planner here.
The next thing to bring up is for pre-retirees who are close to stopping their wage, especially if that’s during bad markets. We had a client who was five months into her retirement call us and say, “It seems like so much bad news is out there, and with what’s going on with the markets I’m wondering if it would’ve been better if I had just kept working.” We reviewed her plan, and because we built this expectation of bad markets into her plan, everything looked great. Really, the only reason to keep working would be if she really enjoyed this sort of work that she was doing and it brought her some purpose, but she didn’t. It was great confirmation that she was still on the right track. If this sounds like you, take a look at this video with a few real examples of what working an extra year might look like in a financial plan.
The next thing to know is that no one really knows what’s going to happen next. It seems like everybody has a prediction on TV, YouTube, or at the dinner table with family, but no one knows what is definitely going to happen. It’s important to prepare your investment plan for the four economic seasons that we may go through in the future since we don’t know which one we’re going to go through next.
The four economic seasons are higher than expected economic growth, lower than expected economic growth, higher than expected inflation, and lower than expected inflation.
In retirement we may have a tendency to compare ourselves to others. The grass is always greener on the other side of the fence. If we mention a dollar amount in a video as an example, we don’t want that to make you feel better or feel worse about your current situation. Because we help high net worth families at Streamline Financial, we sometimes mention big numbers, but we don’t want it to be about the numbers. We really want to communicate the principles and the strategies that can be applied to anybody’s finances.
There are always going to be people with more than us, and then there are always going to be people with less. Comparing ourselves to someone else can hurt our retirement plans because that leads back to that first point that we talked about – feeling like we should be doing something different. One of the most helpful pieces of advice that I’ve heard that we can apply to retirement planning is really the difference between fear and anxiety. When we think about fear and anxiety, we might think of them as being the same thing, but actually, they’re completely different things. Fear is a caution over a real and present danger, while anxiety is a worry over an imagined future danger.
We can’t control the markets or inflation, or what’s happening in the news or the world, or tax laws, or the elections, but a lot of these things actually do relate to things that we can control. You can control when to pay taxes when it’s related to investing. With the news, all we can control is how we consume it.
Either find a great certified financial planner who can show you the what-if scenarios, or check out the DIY planner. Anxiety can be the thief of dreams. It takes you away from enjoying the present moment, and it stops you from even taking the right action to make things better in the future because you only focus on the negative as you’re moving through life.
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