I've been getting a lot of questions from my boomer crowd regarding their retirement. Questions like, "Should we move out of our equity investments?" and "Do I have to work later now that the market has gone down?" and "Ben, when can I retire?"First and foremost, understand that your retirement is very unique to you and based on many different factors (your age, your income need, the sources of income you'll have, your ability to save, your risk tolerance, and the other competing goals you may have between now and that date - just to name a few). But to keep this a column and not a dissertation on retirement planning, let me attempt to offer you some peace of mind during these down times.
I learned a good analogy from Dan Kadlec that I use to explain my retirement planning philosophy when boomers are concerned about their retirement. He writes:
"Remember the last time you left the house late for an event and figured you could make up for it by driving a little faster? But you were late anyway. It's tough to make up for lost time. Leaving 15 minutes late for a drive that would ordinarily take an hour at 55 miles per hour would require you to fly along at 73 mph to arrive on time. In most parts, that's just reckless. A similar kind of math applies to your retirement savings, and lately you've been losing big chunks of time just when you can least afford it. Now is when the boomers have the most skin in the game, and with only a few years of peak earning power left, they'd really benefit from a market surge. Instead, we're getting market sag."
Here are some strategies for coping with today's turbulent financial markets.
You still have time. Because of your retirement goal, you may not think you have the time to ride out these market troubles, but you probably do. Remember, even if you are within five years of retirement, your retirement horizon is, what, 20, even 30 years. You're not going to liquidate a portfolio the day you retire. Know that to be effective in retirement, and have longevity in your portfolio by combating inflation, you'll probably be holding equities (in some percentage) for the rest of your life. What goes down, will come back up.
Stay the course. Or in the parallel Kadlec makes: keep driving 55. If you're going to be late, that doesn't mean you drive any slower, nor should you drive much faster. Maintaining the asset mix that meets your time horizon and risk tolerance, over time, in good times, and in bad, is the best target for the boomers. Kadlec states, "Whatever you do, stay diversified and keep practicing sound, time-tested strategies like dollar-cost averaging and quarterly rebalancing."
SAVE MORE. You cannot control the market or decide when you turn 62 or 65, but you can choose how much to spend and how much to save. That 2-percent raise you got this year? Save it! Small adjustments add up.
Get a financial plan. Planning is supposed to answer all these questions and more. It will determine how to save, and where to save, by setting clearly defined goals based on YOUR dreams and aspirations, YOUR needs and desires. Give me a call, and get started sooner rather than later. I promise I'll get you moving faster than 55mph - the safe way.
Benjamin N. Haas, of Fleetwood, is a Kutztown Area High School graduate. He is a CRPC, Financial Advisor for Ameriprise Financial Services Inc., 3701 Corporate Parkway, Suite 110, Center Valley. He can be reached at work at 484-201-2309 or on his cell-phone at 610-763-5953. Email him at email@example.com.