Important Retirement Tips

Always make a Plan

Many of us don't think much about planning for our retirement until it we feel like we are getting close.  However, planning in advance, decades in advance, is the best way to succeed. Prepare for your future today, and get a customized retirement plan built, just for you. With this road map you will know how much to save, and how long you are likely to work in order to make your retirement dream a reality.  Most of us rarely plan to fail, but often fail to plan -don't let that be you!

Focus on probability when planning and predicting your future

When looking at your financial future, the only certainty is change.  Therefore, when you develop your plan, make certain that your planner or software tool provides with you a probability outcome. Using averages and simple formulas to project your financial future is not a realistic representation of the world you live in.  Monte Carlo Simulation is a popular and highly regarded tool that helps the user better understand the probability of achieving their goals.  Make your planning and projections utilize Monte Carlo Simulation or other well respected probability generator.

When your financial journey gets bumpy, focus on the Plan

A job loss, financial market jitters, and health issues are some of the many stressful bumps you encounter on our financial journey.  When you are in the middle of a stock market correction or if you just experienced a job loss, it is hard to detach yourself from emotions that invade you - fear, despair, and anxiety . Making rash, in the moment, financial decisions typically causes more harm than gain. More likely than not, taking that deep breath, stepping back, and gaining perspective is your best strategy.  Go back and re-examine your retirement plan. This will put your financial life back into view.  You are likely to recognize that this is just a bump in the road, rather than a tumble from a cliff.

Time "In" the markets is more important than "Timing" the markets

While we all would love to know when the markets are likely to go up or likely to go down, history has illustrated that trying to time the markets is a fool's errand. The key to successful investing for retirement is, time IN the markets.  The longer your money is invested, the greater the future returns later in life.  Albert Einstein famously said that "Compound Interest is the is the 8th wonder of the world. He who understands it, earns it, and he who doesn't pays it".  The key is investing early and often.

Investment returns cannot fix insufficient savings

Looking for your investment returns to "make up" for inadequate savings is a fool's strategy.  If I could just earn X% per year more, "I would be all set" - This is a dangerous plan.  Essentially, it forces you to take on excess risk, which is likely to lead to increased volatility, which increases your emotional decision making and ultimately financial failure.  Historical investment returns are a reflection of capitalism and the laws of human nature.  So long as we are still human, our outcomes and behaviors are predictable.  When you look over the last 75 years of investing history, you see wars, recessions, political instability and more.  It is highly likely that we humans are doomed to repeat many of those events.  Therefore, look to historical norms for investment returns and do not rely on unrealistic returns.  Save more or spend less; it is the only reasonable solution.