Retirement is a process, not a single point in time. Clearly, it’s one that’s best navigated only once.
Reading the key signposts of success along the way will certainly help keep you on the path to a fulfilling retirement. These include aligning your career choice and earnings potential with your natural-born talents and having the discipline to right-size the cost of your lifestyle with that of your income. These are simple, but tough, things.
Beyond strictly financial-related signposts, there are also qualitative pitfalls to avoid. These may include the personal choices you make to avoid a costly divorce or even actions you take to strengthen your biggest asset, your own health.
At the upcoming Front Street Foundation Money Series presentation on Wednesday, May 17th, we’ll work to guide attendees along the pathway of what I call, The Big Transition, and highlight some tangible planning tools for success before and after retirement.
As a preview, I remember a key investing lesson of Warren Buffett’s that I think is worthy of deeper thought for both near- and current-retirees. As many know, Buffett is famous for loving to buy stocks when the market falls. The reason, he explains, is that he’s always a “net buyer” of stocks over time. In other words, he’s always got new money to invest.
His advice for investors is very logical. When you’re constantly investing your savings – like a person does in a 401(k) plan – it’s great to see bargain stock prices. Counterintuitively, bad news is good news.
However, it’s important to note that Buffett’s publicly-stated “long run” is, as he repeatedly says, forever. In this way, his advice is clearly best suited for the younger investor still early on their path to retirement.
What about for the not-so-young? Those nearing or already in retirement inherently know they are not quite like Warren Buffett. And, I’m not talking about relative intellect here.
Those approaching the end of their wealth accumulation phase and pondering the distribution phase may need to rethink some of Buffett’s universal nuggets of investing wisdom.
As you transition between these phases, your years of methodically investing new dollars in the stock market are steadily shrinking. Simultaneously, your years of consistently drawing from your life savings is ever approaching. Like your body, your recovery time for market losses just isn’t the same!
Your likely transition in thinking ironically reminds me of wisdom handed down by Buffett’s not-as-famous, but equally fascinating investor sidekick, Charlie Munger. His advice, when faced with a vexing problem, is to turn an especially tough question on its ear, “Invert, always invert!”
When you apply this advice to your own possibly vexing transition toward retirement, some new thoughts are bound to emerge.
Join Jason P. Tank, CFA for his Money Series presentation on “The Big Transition Toward Retirement” held on Wed., May 17 at 6:30pm in the McGuire Room at the Traverse Area District Library.