The Retirement Life – The First of Many Steps

I’m sure you’re already aware the markets are very uncertain these days. For most of us, they’re down significantly for the year. For every pundit who says there’s a lot more downside to expect, there’s a pundit telling us we’ve essentially hit the bottom and the upside looks like a return to normal.  

After 46+ years as a trained insurance agent and investment advisor, I’ve now more or less taken down my shingle but am not officially retired. That’s because terminal boredom is an everyday threat to sanity. So how should we react to all this uncertainty?

Most of you reading this are younger than I am, which means your response will differ from mine. I have no idea when retirement will surface in your future, just that it probably will. Perhaps it will happen in the next few years, or it may have already just happened. To the extent you have many years to go before it becomes a reality, then what’s happening now should be largely ignored.

But if you’re anything like me, it’s too late to sell and go to cash. It’s also too early to put more cash to work, assuming you have some. If your future retirement reserves depend on incremental payroll deductions, then just keep on keeping on.

That’s because the money you set aside today will buy more of whatever it is you’re investing as it’s currently cheaper. That’s a good thing and falls generally into a concept called Dollar Cost Averaging.

On the other hand, if you’re only a few years away from retirement, then you have more cause to be worried. But not alarmed. Chances are your retirement will be a 25 to 30-year trek into an as yet unknown financial future. What’s happening now will be offset by what comes next when seen through your eyes ten years from now. It’s entirely possible there’ll be another crash between now and then. It’s been known to happen.

If, however, your real life is similar to mine, you should have already come to terms with how your financial life will play out. One of the deficiencies I’m dealing with is that my planning fell short in terms of longevity planning.

For much of my career, we thought of longevity in terms of averages. When I was 50, talking with and advising similar 50-year-old clients, it was “normal” to talk about life expectancy for men living to age 78 and women living to age 82. We were conditioned to use those metrics when helping others make decisions about how much to set aside for use in the future. I too fell into that trap.

What people in my profession tended to ignore was those numbers were averages. We didn’t pay sufficient attention to the obvious fact those averages included people who had already died. That left survivors living beyond those numbers, and every one of them still had bills to pay. Where was that money going to come from? If you’re no longer earning money, it has to come from earlier savings and investments.

I now vigorously counsel others to expect to live to age 100. I cannot describe the resistance and eye rolls I still get. It’s a hard lesson to learn. I’ve already passed the average number and hope to be here at least another ten years. I too am wondering how I’ll continue to pay my bills.

I’ll talk later about some of the steps I’ve taken to increase my odds of having enough money to pay my bills in 2030 and beyond. In the meantime, I’ve done my best to not freak out about the COVID-19 virus, the crisis in Ukraine, the efforts by the FED to increase interest rates and how high they plan to take them. But it’s all impacted the economy and the lives of people around me. In my opinion, we’re months away from a minor recession.

But in some ways that’s a good thing, since markets don’t wait until there’s proof normality has returned. It attempts to anticipate, which means people start trading cash for market positions BEFORE it actually arrives. The challenge is to not jump in too soon. If you’re young, it really doesn’t matter but if you’re my age, it matters a lot.

No matter where you are on the age spectrum, when it comes to retirement, there’s an old adage to follow and it reads like this: failing to plan is effectively planning to fail.

Tony Kendzior, CLU, ChFC – 25 JUL 2022