When I advise my clients about their retirement, I can’t just focus on asking them “how much are you saving”? or “do you think you are conservative or aggressive”? These are questions to be addressed, however, a couple’s retirement is dependent on a few other financial disciplines that are interconnected with retirement planning to flesh out the entire retirement discussion. Some have to do with behavior and others have to do with prudent planning. Life has a way of throwing different barbs at us and we must be cognizant of how these life risks affect our retirement planning.
Life Risk #1
Being a slave to debt
If a couple stays healthy, living within their means, are good savers, and are either out of debt or working diligently to get out of debt, then this couple has a very good chance of having the type of retirement they dream about. However, if they don’t have good spending habits and are constantly enslaved to debt, retirement may be a nightmare instead of the dream they wanted. Knowing the neuro-science behind what makes some people good savers and other good spenders is important. Once they know the triggers that cause them to behave one way or the other, they can start training themselves to either continue to be good savers, or to change their habits/addictions they have of constantly spending more money than they have.
Life Risk #2
Developing a dread disease
I don’t know of a person that can determine whether they will develop a dread disease, however, the only way I know help stave off complete financial devastation is to have medical insurance or at least, a catastrophic plan. A family cannot let their family be exposed to this type of risk without this type of coverage. Everyone gets sick or hurt, some more severely than others so it is incumbent on us that we plan this risk away to the extent we can for the sake of our spouse and children.
Life Risk #3
It is my professional and humble opinion that a person should not start investing until they procure a personal disability policy or at least get covered under their company’s group disability plan. A person’s retirement depends on income and if the income stops because of sickness or accident, the retirement savings stops also. If the disability lasts a lifetime or even an extended period, there is no other way to stave off financial ruin than having a replacement of income and that is exactly what a disability policy would provide, a replacement of income. The benefit may not allow enough income replacement to save towards retirement, however, it may be enough so that they don’t have to pull any money out of the retirement savings they’ve already accumulated. The benefit may help to maintain paying our everyday expenses without going into debt, missing payments, or dipping into retirement savings (which taxes will be and penalties may be assessed).
Life Risk #4
Parents needing care or enabling children
If parents haven’t planned appropriately, there may be a need for us to take care of them by either providing funds or stepping out of the marketplace to personally take care of them. Either way, much income will be lost to take care of the need. Although there are options for the parent’s care like Medicaid, however, this may not always be a palatable choice. People need to make a hard decision on how this risk is to be covered. Another risk is the enablement of children. Bringing up children in a responsible way that teaches a “hard work” ethic is easier said than done. It seems that more and more young people are born with a smartphone in their hands that creates a gaming addiction in the child instead of wanting to play team sports or doing group activities without the use of an electronic device. I know this is a generalization and there are circumstances out of our control as to why we need to provide for our children for an extended period or, perhaps, a lifetime, however, if the child is perfectly healthy and able to do work, the best thing parents can do is to get them off their payroll and allow them to grow up by pushing them out of the house to start fending for themselves.
Life Risk #5
Making emotionally driven decisions during an economic downturn
When people make irrational decisions during an economic downturn, they can irrevocably ruin the prospects for their retirement. Bad behavior is why I got into the financial advisory business. Over the course of my first ten years, I talked to countless do-it-yourselfers that blew themselves up getting out of the stock market at the wrong times and back into them at the wrong times. The strategy I use makes so much more sense, even for older clients. Instead of selling into stock market weakness, we buy into the weakness. Depending on where we are in the business cycle, we may be selling stocks into market strength instead of buying stock. These two strategies help us to buy low and sell high, but we need have good asset allocation to make this happen. With good asset allocation, we have conservative investments and some that are more aggressive. When the market is going down, we sell some of the conservative investments to buy more of the aggressive investments. Buying more shares of growth oriented investments sets us up for higher long term returns and by having more shares that we bought at lower prices that will later help generate income for us. Selling share of growth investments when the market is high will allow us to lock in gains and buy more conservative investments in case there is a market decline so we reallocate to take more conservative stance. We do this these two adjustments depending on where we are in the market cycle. Either way, market up or down, we still have exposure to growth investments. The markets, over time, have a way of taking care of us financially if we keep our heads about us.
Every time we make a decision, we choose. We have choices to make, and it is in those choices that will either help make or break our longer-term goal of retirement. Hopefully these choices will be good choices. Going to God in prayer and searching bible scriptures about how to handle these is our first and most excellent choice. Going to a knowledgeable CFP® for help with the numbers and that is trusting in scriptures for guidance is the second. Allow Snow Financial Group, LLC to help you make wise decisions to plan for each of these life risks.
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. Snow Financial Group, LLC is not affiliated with Kestra IS or Kestra AS.