Investing for Retirement: What Price Are You Willing to Pay for Guarantees?

Life can be scary sometimes. It can be doubly scary when we realize personal financial decisions are inherently emotional decisions. Who among us has not made a bad choice along the way where money was involved?

Conceptually, retirement is inherently personal. And the elephant in the room at first glance is almost exclusively a matter of whether you can afford to retire. Oh sure, some of us have health issues and we can no longer work, or perhaps our jobs come to an end and retirement is a given, but for most of us, it’s a voluntary step on the journey through life.

At no point along the way are we guaranteed a favorable outcome. We do the best we can with what we have and hope for the best. Try as we might, we cannot rid ourselves of uncertainty.

After what seems a lifetime of trying to help others as a financial planner and investment advisor, I’ve shifted gears and am now teaching those same others how to make better decisions. The future will be whatever comes along, but to the extent you think you are making better choices by framing your decisions around better asked questions, then you are removing some of the uncertainty.

Meanwhile, you’re given options when it comes to selecting from what are hopefully valid choices about how to invest your money. Among those choices are probably some that carry an implied ‘guarantee’. In other words, the odds of losing your money are less than those without the magic word.

So there is a tendency, again in the context of an emotional decision since it involves your future peace of mind, freedom, independence, and future comfort levels, to put most if not all your money where it’s guaranteed. But at what price?

There’s a whole module section at Successful Retirement Secrets where I talk about risk. I explain that it’s not risk itself that’s inherently dangerous, but the failure to understand and manage it. A partial solution is to embrace risk because by so doing, you reduce the risk of running out money before you run out of life.

Among my blog post followers are current and retired employees of the military and federal government. Many of them participate in the Thrift Savings Plan (TSP), a quasi 401k or 403b program designed to accumulate retirement savings. I’m told the most popular fund there is the G Fund which carries the magic word, guarantee.

For the risk-averse, this is a no-brainer. But it comes at a cost. The money you are counting on to pay your bills if you manage to live well into retirement may not be growing fast enough to offset inflation and other threats to your financial security as you get older.

I’m sorry, but you’re not going to get out of the woods alive, unless and until you come to grips with your fears. Learn to manage risk and to the extent possible, try and make better choices with your money. Look for my article, The Car and House Story that I’ve posted to the Resource Vault at Successful Retirement Secrets.

Tony Kendzior \ June 14, 2019