Not a Word about the “Fiscal Cliff”

Posted on Posted in Newsletters

You’ve heard far too much about that whose name will not be mentioned. Instead, let’s talk about investing for retirement:

(1)    Is retirement out of reach?

(2)    Evaluating your “Retirement Readiness”

(3)    An offer from KCS that you can’t (or at least shouldn’t) refuse

Back in 2000, with the stock market at historic highs, both in price and valuation (it was 1929 all over again), lots of ordinary people were getting rich investing in stocks, particularly technology. These lucky (and many believed, smart) investors were going to retire early and live off their portfolios, which would, of course, continue to grow at double-digit rates for many years to come. Their golden years were going to be truly golden, as they were looking forward to a lavish retirement lifestyle.

What a difference a decade makes! First came the tech bust, a 31-month bear market that took stocks down about -50%. The 2002-2007 recovery to new highs made many think that happy days were here again, but loose lending (particularly to homeowners) quickly ended that notion. The 15-month bear market that spanned late 2007 to early 2009 was even more brutal than the one that kicked off the 21st century, affecting every sector, every country, and nearly every asset class (notably real estate as well as stocks and most types of bonds). The early/plush retirement bubble had finally burst.

Today people are nearly as pessimistic about their futures as they were overly optimistic in 2000. Neither view represents reality, which is, as usual, somewhere in between. But unless you’re one of the select few with a fat pension, a comfortable retirement necessitates disciplined saving and investing. And while investing involves risk, so does not investing (see my prior eNewsletter). The latter subjects you to the guaranteed ravages of inflation, which even today at historically low levels is clearly visible in such items as food and gasoline.

What’s a prospective retiree (and we are all either retired or planning to retire, albeit at different stages of the process) to do? Throw in the towel and settle on a drastically reduced lifestyle dependent largely on Social Security, which in the future will almost certainly be even less generous than today? Plan to work to age 88? Neither option is very attractive.

Retirement Readiness

As with anything else in life that’s important, retirement requires advance planning. You can’t just decide at age 64 that you’re going to leave your job next year and expect the rest of your life to be comfortable unless you’ve put a considerable amount of thought—and action—into preparation for that hopefully joyous event. But I continue to be amazed at how many people do just that, relying mainly on hope and perhaps prayer.

It doesn’t have to be that way. Whether you’re very wealthy and mainly worried about maintaining your plush lifestyle once the paycheck stops, or you just want to leave the rate race at a reasonable age and maintain your current middle-class lifestyle, the process is the same. You must plan ahead. And it’s never too early to start (but there is a point at which it’s definitely too late!). Get serious about planning 10 years or more before retirement, and you’ll probably be OK. Wait any longer and your retirement date will almost certainly be delayed by more years than you’d probably like.

As with anything else that’s both very important and potentially very scary, many people become paralyzed and worry rather than plan. Retirement anxiety has become a highly prevalent condition these days (if only the last 12 years had never happened!). But there is an effective cure from retirement anxiety: it’s called a retirement plan. And with modern technology (and perhaps a few strategic medications), the treatment can be surprisingly painless.

At KCS, our process for retirement planning is sophisticated and detailed. I’ve described it very briefly previously (in the article linked above), but this week a description of our approach appeared in the premiere financial planning periodical for professionals: The Journal of Financial Planning. I have received permission to link to the article, so you can read it here. Though written for professional financial planners, it’s very “how to” and clearly written (if I do say so myself!), so that a layperson should understand it. I encourage you all to peruse it at your leisure.

An offer you shouldn’t refuse

Lastly, because retirement planning is so important, I’m repeating my previous offer for a free consultation to determine your Retirement Readiness. We won’t go through the whole process, which takes many hours and is only available to clients, but I am willing spend about an hour to help you answer the question, “Can I retire?” I can’t imagine why anyone would forego such an offer, unless: 1) you fear the answer so much that you’d rather keep your head in the sand; or 2) you already know the answer because you’ve gone through the process already.

Why do I make such a generous proposal (an hour of my time usually goes for at least $375)? I’m doing it because the exercise will lead to one of two possible outcomes, either of which will benefit both of us:

  1. You’ll learn that you can retire when you want and live the lifestyle of your dreams during retirement. You’ll go away happy and I’ll feel good that I’ve given you peace of mind. Maybe you’ll be so impressed that you’ll become a client, and/or send a bunch of your friends to evaluate their Retirement Readiness, some of whom will become clients.
  2. You’ll learn that unless you make major changes in your spending, saving and investment habits, you’ll retire poor or not at all. In this case, you’ll be depressed, but I’ll help you out of your funk by showing you exactly what it will take to get you on the right track. You’ll almost certainly become a client, unless you really prefer working until age 88.

I know that most of you who decide to accept this free consultation will do so in January and February, as part of your New Year’s resolutions. But the end of the year tends to be slow, so those of you who move quickly will find it far easier to schedule a time for us to meet. This offer will end well before tax day and isn’t likely to be extended.

Carpe diem! (In English: You snooze, you lose!)