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As a financial planner, I have the opportunity to meet a lot of wealthy clients. However, when they stop working and start calling themselves “retirees”, they get pretty concerned about their yield.
Sometimes I get to wondering if Internet is really helping these retirees since they can check their investment fluctuations on a daily basis.
Considering the current market, looking at your investment portfolio everyday will make you seasick.
“Don’t be surprised if I call you to sell everything one day” one person told me a few days ago. You really want to lose your money? Then go ahead. The client is freaking out because he lost (on paper) 10% since July 2008.
The thing is that he is now freaking out because the money is not coming in like it used to. He sold his business and withdraws money every month from his non-stop-dropping investments for living. This is why he has become so cautious about his money and looks at his net worth every 30 minutes.
I’m telling you this story because when you are looking at retirement planning, you must put your emotions aside and stick to the plan. Stick to the plan. I know, it’s tough, I know, it’s not my money that I’m losing, I know, I’m younger and have plenty of time in front of me. I know.
Well, let me tell you something I was discussing with a journalist that used to work for a well known business newspaper. He told me that there is so little bad news these days (not many wars, no cyclones or tsunamis, no epidemics) that the only thing journalists have to talk about is the economy and that Obama is our savior.
He actually told me that we might stop hearing about the recession (depression?), the bear market and other things all of a sudden in a few months. Why? Not because the crisis is over but because the media is looking for new sensational topics. Then, people will read less dramatic headlines about the stock market and hopefully will believe in the long term investments again.
So this post is meant to be a warning to protect you from… yourself. It will be normal that at retirement you will want to “stop the madness” and cash in your investments. However, cashing in your investments can be the worst thing to do. The truth is that because of inflation, you won’t be able to live on GIC’s and other fixed income products alone. If you do this, you will outlive your capital.
Is there any antidote to freaking out at retirement?
There is on trick I can give you. Find yourself a great financial planner and have him design a retirement plan for you. With a solid plan and a great asset allocation, you will be able to withdraw enough money and live a great life.
We will get back to the financial plan in another post. In the meantime, send me your questions at thefinancialblogger-at-gmail-dot-com or comment on this post.
