Broker Check

Is Retirement a Fairy Tale?

Our economy isn’t inspiring much hope and a financial happily ever after seems prosaic. Retirement is turning into a fairy tale.

When was the last time you sat down and watched a Disney movie? Most Disney movies end the same way; after an epic struggle, the hero slays the witch, kisses the girl, or overcomes an epic challenge. Finally, the movie will end with the characteristic happily ever after.

How does your own life reflect the same story? You have overcome the obstacles in your life and made it to the Promised Land: Retirement. If your life were a Disney movie, you should be smack dab in the middle of your happily ever after – if that is true, congratulations. Most people are not sure they are going to have enough income to survive the rest of their lives. How much stress are you enduring worrying about the same issue? If it were possible to know how much income you could draw every month of every year without running out of money before you died, would that be of interest to you? It is possible to find out and actually fairly easy to determine.

If my house were on fire, it would burn to the ground. Even if I lived directly behind a fire hydrant and all I had to do to save my house was to turn the hydrant on, my home would be toast. A professional firefighter would laugh at my incompetence. However, I would argue that knowing how much income you can draw for the rest of your life is as simple for me to determine as it would be for a firefighter to put out the fire in my house. It is simply a matter of where your area of expertise lies.

My expert advice: only put money at risk in the stock market that you do not need for at least 15-20 years. Allocate your money so that you have the income you need for the next 5 years in a liquid non-risk account.

This will allow your other assets to be put into accounts that are actually getting a decent return and take advantage of the power of compound interest. This concept may seem as foreign to you as my not knowing how to open a hydrant, but once you see how, you will think that this is easy too. Once you’ve retired, the time for big risks in the market has passed. Make sure you only take as much risk as you need to succeed.