Just finished this book and thought they were a few interesting points worth sharing for you and for myself as well. Hope you find them insightful and serve as a good reminder.
“Nobody wants to be sold. They want instead to be educated, particularly when it comes to something as important as their retirement. They want to hear about what is best for them, not what is best for the advisors. Virtually nobody who comes in to see us for the first time has a retirement plan. They usually have a pile of products that have been sold to them over the years without any clear direction or strategy on how that pile of products is going to properly position them for retirement.”
When I first read this, I was almost nodding my head furiously as that is exactly the state most of my clients were in before they met me. Pile of products with no idea how it helps them get to where they want to go.
“What many people find is that a sedentary lifestyle is not for them, at least not every day. They want to get out of bed and head out to face the world with a purpose. They actually feel a strong motivation to get back to the workplace. Sometimes it’s because they rediscover their spouses for the first time in decades and need to balance the together time with additional activities outside of the house. Maybe they just feel the need to keep contributing. Some launch a new business or start a new careeг. In short, retirement is a time of choices.”
Planning for retirement is all about giving yourself options. Period.
“Your financial plan needs to be more than a collection of products. It needs to be a strategy for getting from point A to point B. For thirty or forty years, you have tried to put away money to grow, but you might not have had an end strategy in mind. In the accumulation years, that worked for you. The gain was your aim. Now you need a strategy to connect the dots for the highest probability of a successful retirement. That begins with getting clear about just how you define success.”
Sad to say, many have no idea what the broad strategy is to help them achieve their retirement goals.
“Suppose that one fine morning we were to stuff a million dollars into a suitcase and tell you that we had placed it on a doorstep somewhere in your city- and that it would be yours to keep if you could find it before the sun went down. You might protest that such a task would be next to impossible. But suppose we gave you a map, with X marks the spot, or the GPS coordinates for where you would find that treasure. You no doubt would scurry out to lay claim to your reward. That’s what it’s like to map out the path to a successful retirement.”
Unfortunately it takes alot more discipline and will-power to say yes to planning for retirement compared to going on a ‘treasure hunt’!
“Let’s compare the performance of three sixty-five-year-old investors-we’ll call them Jan, Bob, and Mike. Each has
invested $1 million over twenty-five years, and each got the same 7 percent rate of return. Each of them also withdrew
$60,000 every year, which, on the initial $1 million, was a 6 percent withdrawal rate.
The only difference was when the positive and negative years came within that investment period. For Jan, the first
three years were very good ones. Mike got the same 7 percent return every year. Bob started out with two years of negative
returns but then had three positive ones. At the end of those twenty-five years, Jan had about$1.1 million. Mike ended up with $430,000. And Bob had nothing-he’d run out of money in the twenty-third year.
That’s a big disparity between the three portfolios, even though they all had the same average rate of return. The reason that Bob ran out of money was that the initial blow to his portfolio meant that the ensuing $60,000 withdrawals no longer represented 6 percent.”
Many fail to understand the immense impact of losses versus gains especially when most bankers/advisors will only focus on returns and not on how risk is properly managed.