“Pressure is what you feel when you are not prepared”
As I write this blog on Monday, February 24, 2020, the Dow is down about 900 points at mid-morning. Most analysts are pointing to the recent outbreak of the coronavirus in Italy and South Korea as spooking the markets, since this could set off a global economic slowdown. We shall see.
Have you ever said to yourself, when X happens, I’ll do Y? In other words, you’re waiting for the stars to align in your favor and then you’ll decide to do what you’ve been putting off for a long time?
In terms of financial planning, my sense is that too many people are waiting for the 'perfect' time to develop a comprehensive financial plan instead of moving forward when life, although not perfect, is pretty darn good. I would suggest that waiting for the perfect time is not only a risky decision to make, it could also end up costing you big time over the long run.
As many of my boomer clients get closer to that ‘magic’ number of enough savings to become financially independent, the concept of retirement, even just using the word ‘retirement’, is causing many to question what comes next.
Just last week, I came across a recent tweet written by Carl Richards. He’s the New York Times money sketch guy who writes a weekly column about behavioral finance.
The latest economic guessing game these days is predicting when the next recession will occur in the U.S.Last week, I had the opportunity to attend a mid-year market outlook conference at Charles Schwab headquarters in San Francisco. There were four panelists; two from the equity side and two from the bond side of the investment world. Liz Ann Sonders, the Chief Investment Strategist for Schwab, was on the equity ‘team’. All four panelists agreed on two major themes; the global economy continues to slow down, and that a recession starting in early 2020 is a very likely possibility.
“Despite the good withdrawal rate, I still fear some catastrophic situation and imagine sitting on the curb as a bag lady! That, of course, requires a therapist--not a financial planner, eh?”
(This blogpost appeared four years ago, but it bears repeating.)
The above quote comes directly from a client, let’s call her Mary (not her real name) responding to an article I emailed her about the 4% withdrawal rule in retirement.
Imagine you just left your job/business/practice for the last time after an illustrious career of 42 years. Today was your last official day of working for money and tomorrow, as the saying goes, is the first day of the rest of your life.
A week has gone by since your last day of work. You’ve been super busy, you’re still waking up at 6:30 a.m., still following a tight to-do schedule, so the sense that you’re no longer working hasn’t really sunk in yet.
Imagine you’ve been following a customized financial plan diligently for the past 10+ years. I say 10+ years and not 20 or 30 years, because truth be told, in my experience as a financial planner specializing in retirement planning, most people don’t buckle down and take retirement planning seriously until they’re about 10 years away from this major milestone in life.
Now imagine the number, the number that’s been in your head, in your dreams, the number you’ve known about and thought about, the number that represents your financial independence, your financial freedom from ever having to work another day for money has been reached. Now what?
It’s the million dollar question and also one of the hardest questions to answer before you retire: When is enough, enough?
If you asked me that question back when I was a young and ambitious entrepreneur, striving yet never arriving, my answer most likely would have been never. You could never have 'enough'. Back then, I was a true believer that the sky’s the limit when it comes to earning money. More income meant more toys to buy, and anyway, how could one ever have enough?
You’ve made it to the ‘finish line’. You’re financially independent and retirement beckons. You’ve diligently saved for decades, and now retirement is no longer a fantasy - it’s as real as it gets.
Now, instead of adding to your savings, you enter the phase of your life where you begin withdrawing from your savings. You keep telling yourself you have enough money saved up to live the retirement lifestyle you imagined.