Last month, my article was titled "The Personalization of Politics." Now, if you didn't read it (shame on you- it was terrific!) I suggest you see if you can get a copy, or go to our website, www.chestnutinvestment.com to bone up on it. The crux was using the metaphor of anchor babies to anchor parents, and how elder parents or grandkids may keep us anchored to a location we may not be able to afford, or intended to be in at this stage of our life. This month, I'm going to stay with the politics theme*... I'm writing this article the morning after Sanders and Trump won the New Hampshire primary and how subliminally it affects you. No, I'm not in favor of one or either of them, just how the simile of the win captures your linear similarities. How, you ask? Well, I love it when you ask me that question...
How many times did you make long terms plans? A vacation, purchase or most importantly... retirement? You planned, did notes, researched, dreamed, imagined and any other adjective you can name and incorporated those strategies into the achievement of your goal. Somewhere along the way, you ran into a pothole which veered you off course, or set you completely in another direction. At the beginning of this election cycle, Hillary and most of civilization thought she was a lock on the Democratic side. But, along came Bernie and turned what she and everyone else thought was a definite into a contrary: along comes Bernie and crushes her in the Iowa upset. Now, remembering that I am not electioneering in any way, the same can be said for your plans. You planned, assumed, and counted on an outcome which did a u-turn in the tunnel and ended up totally different- you lost your job or retired early, the market didn't behave the way you anticipated leaving you with the result of having less accumulation of asset than you expected to have at retirement, leading to lower income than you expected. Your child or children unexpectedly moved back (my favorite expression is "they move out but they never leave") or illness, aging parents or any of a thousand reasons for putting monkey wrench in your plans made you change them unexpectedly and outside the plan. Time for Plan B? Perhaps you are already up to Plan G by now?
From the time we start working, we are working on accumulating money for retirement. Savings, IRA's, Roth IRA, 401(k), Tax Sheltered Annuity, Money Purchase Plans, Profit Sharing Plans and others: all vehicles to accumulate money put away years or decades before we need it. We scrimp and we save, sacrificing now for a comfortable tomorrow. Many years ago if you were fortunate to be in a corporate plan, you had a pension guaranteed to you if you stayed there long enough and dedicated your work life to the company. But, times have changed: those programs, mostly called in their day Keogh Plans, pretty much have been phased out leaving you to figure out how to financially secure your retirement on your own. So, as much as you planned, schemed, and outlined, things may not go as you planned. The way to deal with the unexpected changes is just that- planning. It's important to look at your alternatives, review your goals and resources regularly and act accordingly. But, that’s not the only key... it's also in the way you are thinking.
We've been trained to think about accumulation of assets- but let's call that the first phase of getting ready. The key to a successful retirement is recognizing the second phase: the income phase of your retirement. It's not about how much money you have, it's all about how much durable income you have- income that you can't outlive. If your stockpile of money stays the same, goes up or down but your income is stable, that’s the key.* The rest is just all about how much you leave behind to your heirs- the first objective is what you started out with... stability of income for life. There are various types of stable income vehicles, including Social Security (yes, I believe it will be there), the rare pension plan, fixed income securities and a host of others that provide you with dependable income stream regardless of variance of principle. Speak with your Certified Financial Planner Professional® about how you can plan your retirement income safely and accordingly.... don't let another New Hampshire upset come along for you.
*Just for clarity, I have virtually no opinion on the candidates or the outcome of the election- just how it affects my dear readers. I am in no way suggesting any investment vehicles- just using investment terms as broad analogies and examples- investment performance cannot be guaranteed. See your professional for advice.