Making Smart Decisions
When we try to identify what it takes to make smart decisions, it’s not necessarily the way that people always evaluate intelligence. Many believe that a good education or high ACT and SAT scores dictate a high level of IQ, but we can evaluate it differently. For some, the definition of a smart person is identifying a problem and then figuring out what you need to do to solve it. Most people would agree this is what it takes to be an intelligent person, but you would be amazed how often people recognize problems and then choose not to do anything about it. We see this a lot in retirement. This is because one of the things we may have to do to make good decisions is change a behavior that we’ve developed into habit. Whether it means that we’re admitting fault or think less of ourselves by making this decision, we know deep down that it’s the right thing to do. Getting ourselves to overcome that hurdle and make the change is where making smart decisions can be difficult. Nobody wants to be told they’re not making smart decisions, but that can be the reality when it comes to retirement planning. We’re going to look at how we can make smart decisions that may affect your future and how to avoid problems later with decisions made now.
Don’t Go Down with the Stock Market
Some of the smartest decisions that you can make today is getting out of something good. That can be hard to do because we’ve experienced a great run up in the market over the last nine years. However, if we don’t get out before it takes a crash, we may end up exactly where we were nine years ago. People don’t want that to happen to them, but it happens all the time. We want to be in a position where we can make smart decisions when it comes to how we manage our money. Sometimes that means pulling back the aggressiveness at the right time. Just because you pass a certain age does not necessarily mean that you have to pull out of the stock market. We’ve got clients that have money in the stock market and keep it in their retirement, but we have to recognize that there are things that are needed in retirement that you didn’t need at that exact point in time. From a standpoint of when you stop working, you’re not getting income anymore. So how are you going to get paid? Well, you hope that you have income sources like a pension or that social security will be there. But pensions have started to fall away. Some people aren’t as confident in social security anymore. Your investments may be the main driver of what your lifestyle looks like in your retirement. That means you’re going to need to generate income, not just overall growth or appreciation. People want consistency and they want their income to consistently go up as well. If you’re not happy with just a flat check, you’ll want to have incremental increases so that when inflation takes place, you’ll now have more money available to pay when costs go up.
Overcoming with Change
The number one concern people have is running out of money before they run out of life. Why are they worried about that? Because they’ve not made any changes or any decisions that will help them overcome what that problem is. We want to see that if there’s a problem, like being worried about income, we can conquer it by making smart decisions about how we get income out. If there’s a problem where people are worried about how they’re getting their income in retirement, we want to put solutions in place that will allow them to have the income that they need. Then they can make confident decisions moving forward as a result of the smart decisions they made to plan for that problem. That’s what planning is all about: making good decisions when problems appear.
Conducting Your Retirement
If you’re familiar with orchestras then you know that if you show up a few minutes early, you’ll hear all of the musicians warming up their instruments. They’re all doing it in their own way, and it sounds like chaos. You wonder how all these different sounds are going to come together. When it’s time for the show to start, a conductor walks out to center stage, stands on a box, and grabs a wand. As soon as he does, there’s a hush in every instrument. He now has command of the room. He then starts waving the wand and every instrument, at the same instant, begins playing. It’s amazing from start to finish because the conductor is commanding 100 different people with different instruments and different sounds. Working all of those things together is an expertise that that conductor has. We try to make that transition over to real life when we ask ourselves what areas of our life could use a conductor. What areas of our life have no clear direction? A lot of times when people come into retirement, they have accumulated a lot of different stuff over the years. Over a 30-year working career, they’ve saved some money. They’ve saved it in many different places. They’ve got a will that they started when their kids were born. They’ve got a CPA over here. They’ve got all these different pieces and they are the only thing connecting all of them. When you’ve not had a career in the financial services, it is a very hard job to take all these things you’ve accumulated and make them all work together.
Bringing the Pieces Together
People have different situations going on. If everybody’s situations looked the same, there may not be a need for expertise when it comes to creating a plan for your future. But the great thing about people is that we’re all different and our situations are going to be different as well. So, you need to have someone who’s well versed in planning for retirement and can help to bring these pieces together, who can be the one that you get this information from. How do we make decisions about taxes, healthcare planning, or estate planning? How do we make all these things work together to get from where we are today to the end of our lives and know that we’ve got a good probability of accomplishing our goals? You may be on your way to retirement, or you may be in the middle of your retirement. Regardless, you don’t know how much longer this journey is going to last. So, start making informed decisions, find a conductor to shape your plan and restore confidence, and fulfill your retirement goals the smart way.
Adapted from John Vandergriff’s radio show Plan For Everything by Neil Ervin
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