NPR News, Classical and Music of the Delta
Play Live Radio
Next Up:
Available On Air Stations

In Mountain Climbing and Retirement Planning, the Object is to Get Home Safely

5361827088_bf7c9fb68d_b.jpg / duncan c

What is your time horizon when it comes to your retirement planning?
Before you answer, check your calendar, your watch…or maybe your birth certificate. I’m guessing your time horizon is a lot longer than you might realize.

If, for example, you said that you have a 20 year time horizon, I’m guessing you mean the time until you plan to retire. So that would make you mid-forties (sorry to give that away).

You feel like you are at the base of your own personal financial Mount Everest and you’ve got a mere 20 years to climb to the top. Fine.

But is that where your journey ends?

Any mountain climber knows that the peak of the summit is not the finish line. It’s just the halfway point.

And if you live a normal life expectancy in retirement, you’ll have another 20 years on the other side of your last day of work. So in our example, you don’t just have a 20 year time horizon…yours may be 40 years…or more.

So with that recalibration of your journey’s length in mind, here are some things you can do:

Make protection a priority. Life happens. Whether it is a sickness, accident, natural disaster, disability or premature death, unforeseen calamities can wipe out your best efforts in a moment. So make sure you work with licensed experienced professionals to address what areas in your life need protection.

Save first, and then spend the leftovers. If you spend first, then try to save what you can, you’ll never save enough. I have yet to meet the retiree who said, “I saved too much money!” If you are not sure where to start, shoot for 15% of annual income.

Understand the rules change in retirement.  Think you hate volatile markets now? Actually, you should love them while you are accumulating money. Ups and down allow your steady monthly savings to buy less while prices are up and buy more when the markets are one sale (also known as dollar-cost-averaging).

But when you start pulling money out of those same accounts during your retirement years, the fluctuation works in reverse, magnifying your losses and offering no timing advantage when markets are up.

Understand that YOU will change in retirement. In a nutshell, you’ll tend to be more financially fearful and fiscally conservative. I have found most retirees are more comfortable with a base of guaranteed income (from a pension or a guaranteed income annuity), with conservative investments and savings dollars standing by to fill in the gaps.

The old Chinese proverb says the journey of a thousand miles begins with the first step. With much less profundity, I will offer that the journey towards a successful retirement (pre and post) begins with a good plan.

Offering you Wisdom on Wealth, I’m Byron Moore.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.