By Eric Reich
Last week, I wrote an article on the way in which self-defense and financial planning/investing were similar. I left out one of the most important examples because, honestly, it needs to be its own article.
Planning in retirement is tricky. Unlike saving for retirement, where consistent contributions to low-cost, well-diversified, equity-heavy portfolios and enough time will likely get you to your goal, planning during retirement is a lot harder. When saving, if I have not yet reached my goal, I can maybe delay retirement a year or cut out some extra spending, etc. In retirement, I am planning for an end date that I don’t know. Retirement could last 5 years or 35+ years. My income needs could be completely altered due to an unforeseen event. As difficult as this is, the bigger issue is that I don’t know what will happen during retirement. That could derail my plans. This brings us to a key self-defense/financial planning tenet: Expect the unexpected.
In self-defense, my sensei would tell us what we were going to do each night. Sometimes, he would completely change what he said we were doing and would instead surprise us with something, no doubt stressful, difficult, and probably painful. After all, painful lessons are often the ones we remember most. He would then remind us to expect the unexpected. I have carried this idea with me throughout my professional life as a financial planner who is focused almost exclusively on retirement.
How do we expect the unexpected during retirement? For starters, I usually ask clients if everything they thought was going to happen over the last 25-30 years actually happened exactly the way they thought it would. 9 times out of 10 they laugh. Of course, they laugh. It’s ridiculous to think that your life would turn out exactly the way you planned in every respect. My next question is always why. Then, would we think the next 25-30 years will be any different? There is so much more potential for something to go unplanned from 65-90 than from 40-65. Caring for aging parents is an ever-growing problem. Children having their own family problems is another. When you were younger, you only had to worry about your family. If you have 3 kids, you now have to worry about your family as well as 3 additional families. That increases the potential for more family issues. Lastly, your or your spouse’s health may be the biggest issue of all that could completely and sometimes permanently derail your retirement plan.
We can’t stop the unexpected from happening. Instead of trying to stop it, we can make a plan for some unknown future unexpected event. We don’t need to know what it is today; we simply need to know that it likely will happen. By planning for an unforeseen future event, we can hopefully mitigate the damage that such an event might cause. There are many ways to plan for an unforeseen event in retirement. Talk to your financial advisor about ways that might be appropriate for you.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
