Can you run as fast today as you could 20 years ago?
Probably not. We get slower the older we get.
And it isn’t just our 40-yard dash time that declines. Our willingness to accept change and tolerate risk both decrease with age.
There are always exceptions. But most folks are far more safety-conscious at age 75 than they were at age 25.
This means we need to prepare ahead of time for these inevitable changes. Better to pump the brakes gradually than have to slam them on at the last second, right?
This is what wise financial plans do. They anticipate that our tolerance for risk in retirement will be lower. As a result, they start preparing and adjusting long in advance, not 30 days before your last day of work.
Here’s what that means for you. If you’re over 40 years old, you need to be thinking now—not simply about retirement but also about the level of risk you’ll be comfortable with in your late 60s and 70s.
Maybe this example will help.
Jane and Denise went to high school together and began their careers the same year.
Jane went to work for a bank, which endured a wild succession of buyouts by ever larger banks. Each time, stockholders like Jane became wealthier and wealthier.
Denise went to work for her local school board. She never earned the kind of money Jane earned, and she didn’t enjoy a comparable lifestyle. But she was comfortable—and took comfort in the school board’s guarantee of a steady retirement pension if only she’d make education her career. So that’s what Denise did.
Jane and Denise remained friends through the years. They raised children (and husbands), emptied their nests, and even did some traveling together. Jane always had more money; Denise always had more time. (Both were secretly jealous of the other.)
Today, both are retired.
Jane has plenty of assets. But they’re subject to market volatility. She’s seen her bank stock soar, then sour, then soar some more. All this risk makes her anxious. She constantly fights scary “what if…?” questions in her head.
Denise, on the other hand, doesn’t think much about money. She gets a monthly pension check about the same size as her last few years of employment. No one would consider her “rich,” but she also doesn’t fret about money.
Jane’s net worth is larger; Denise’s quality of life is better.
Too bad Jane didn’t “pump the brakes” in her 50s and create a predictable retirement income plan that aligns with her decreased appetite for risk.
What’s the lesson for you?
If, like Denise, you’ve got a guaranteed pension income in your future, count your blessings!
If like Jane, your plan is focused on accumulating and growing your assets—but retirement is coming at you quickly, it’s time to make a retirement income plan now. If you’re like most retirees, you’re going to want to “slow down” to avoid unnecessary risks.
Ideally, the time for that is years—not months—before your last day of work.
As we get older, we slow down physically. And as we approach retirement, it’s smart to consider how we need to “slow down financially.”
To help you think through such issues, I’ve created a comprehensive checklist of pre-retirement questions for people who are 60-something. It’s free if you’d like a copy. Just email me at bmoore@argentadvisors.com, and I’ll send it to you right away.
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