On Life Transitions...And Some Keys to Financial Success

My dad, as he got older, would respond to people who said positive things about him aging well that “…there are three stages in life - ‘childhood’, ‘adulthood’, and ‘you look good’ (even when you don’t actually look that good)”.  Actually, I think that that these can be broken down into early and late of each category.  I’m realizing that I have hit the early part of the “you look good” stage.  How have I come to realize it, you ask?  As the saying goes, “at first gradually and then suddenly”.  The first clues that I ignored were of course the losing of my hair - who knew how bald I’d gotten? - with the remaining hair gradually greying. Then I became Social Security eligible.  Though, believe me when I say that I delayed claiming Social Security based on my financial plan and not my clinging to my image of being “too young” for Social Security.  My financial plan tells me this delaying is a wise choice, and we seniors may not be as quick mentally as we used to be, but we’re loaded with wisdom gained from our many mistakes.  Finally, last October I began Medicare coverage.  Even with all the evidence, I was still in denial until my wife Susan and I took a trip a couple months ago to visit my step-daughter in Boston.  We went to a restaurant that had three floors, and of course we got seated on the top floor. Since I’m early in the “you look…” stage, the stairs weren’t a problem even when I had to visit the bathroom on the first floor and climb back up to the third.  The problem was when I returned, pulled out my chair and started to sit down … I was at the wrong table!  A bit embarrassing to say the least.

Anyway, I thought I’d tell this story for two purposes - though this kind of self-deprecating commentary always seems to get cut by my editor:

  1. To show how our perspectives change with aging and that may need to be factored into keeping our financial plans up to date
  2. To illustrate humility - which is an absolute necessity to be a successful long-term investor.  I think that I had a head start on humility as my dad also liked to remind me that I “had a lot to be humble about”.
My Momentous Financial Transition

So, this move into my mid-60s (technically I’m now closer to 70 than 60) has been an interesting transition for me as I’ve become less involved with the day-to-day portfolio management of our clients while becoming more reliant on our own portfolio for our financial future.  While we are not yet at the point of relying solely on our portfolio, we are headed in that direction.

Over the years, we’ve guided many clients through this phase that can be quite emotionally challenging.   To many people, no longer having regular working income feels like a scary leap of faith without a parachute.  Yet the truth is that we have never had a client crash land while making the leap, provided their financial plans indicate it is an appropriate time.  The transition, when well-planned and well-executed, tends to go smoothly, allowing for a great sense of independence, peace and freedom.

So, anyway, back to me (another one of my dad’s favorite lines). I have to confess, I initially looked at my portfolio more often and felt the inevitable swings more deeply (than I should, knowing what I know).  Yet, as we tell clients, volatility in the short run doesn’t really hurt us financially while it is imperative to have a portfolio in place that will keep up with inflation in the long run.  In other words, at this stage of life - let’s call it “retirement”, even if many of us are not fully retired - a sound investing strategy must provide for the potential for Susan or me or both of us to live another three-plus decades.  To stay ahead of inflation, that means we must have a significant portion of our portfolio allocated to stocks.  As has become so painfully obvious during this recent bout of inflation, solely investing in bonds that generate a fixed stream of income won’t cut it as income needs rise over time to keep up with rising cost of living. Of course, with this emphasis on stocks, we have to be prepared to ride out the inevitable, often significant, portfolio swings.  What helps to keep our eyes on the long-term growth focus is to remember that in the short-term we will likely not run out of money no matter how volatile the market is.  Again, our main risk to be planned around is the potential to outlive our money.

So my truth is that as I’ve stepped back from client portfolio management and my initial emotional adjustment period with my personal portfolio, I’ve paid less and less attention to the daily swings in markets, and I really enjoy this letting go!

I guess that I also have to confess that I do occasionally have short-term market opinions despite advising against it.  Actually, they were a bit more than opinions as I actually acted on them recently.  While it was no big change to my overall strategy, I think I was fortunate that one worked and the other didn’t so they sort of balanced each other out.  But I did learn that making (even minor) adjustments to the plan adds a great deal more stress to my life as I seem to daily keep wondering if I’m a genius or an idiot.  I did tend to watch things more closely - what a waste of time!  Fortunately, I reinforced for myself what we preach that veering from the plan - no matter how smart I think I am - will probably add stress and subtract dollars.  While obviously not a genius, I’m hopefully smart enough to leave well enough alone.

So, I’m heading into this next life stage with a solid plan in place that I’m quite confident will work and I can let it run more or less on autopilot (with Moller Financial managing).  That feels really nice.

A Couple More Things

As I’ve gotten older, I find myself saying “oh, one more thing…” quite often.  Not sure what that is about but it’s probably related to me sharing more information about myself than people are really interested in hearing.  Anyway, if you remember reading in a previous column, I pointed out that my dad in his 90s used to check out at the grocery store telling the checker: “Look I’m still an optimist.  See, I’m buying green bananas!”  So, this actually ties in to my grand conclusion about the three keys to having a successful investment portfolio:

  1. Stay humble.
  2. Match the investment strategy to life stage.
  3. Be optimistic.  (Beside my dad’s green bananas, Warren Buffett has said to never bet against the United States.)

If you are still reading, I thank you.  And if you think sitting down at the wrong table is embarrassing, ask me about what I did at my wife’s birthday dinner at a nice restaurant on the beach in Florida.  That’s a doozy!

Reach out today. This could be the start of a great relationship.

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