In 1953, Sir Edmund Hillary and Tenzing Norgay became the first people to reach the top of Mount Everest, the highest mountain in the world. At least, they were the first people to make it to the summit and make it back down.
As it turns out, descending the mountain can be just as dangerous, and deadly, as climbing it. The low oxygen levels and extreme temperatures, as well as excessive fatigue after having reached the summit, too often prove deadly for climbers.
An expert guide for Himalayan mountaineering expeditions. He brought a level of experience with the mountains and the unique high-altitude conditions that contributed to the success he and Hillary had in not only reaching the summit, but successfully making their way back down.
Climbing the mountain toward retirement
Planning for retirement can be a lot like climbing Mount Everest. If you’re like most people, you probably spend a lot of time thinking about how you’ll reach the summit — how you’ll accumulate enough money to allow you to comfortably retire. Many individuals spend their lives looking forward to the thrill of the summit — that wonderful point at which they can retire and enjoy increased freedoms and focus on dreams they may have long deferred. Unfortunately, most people take for granted that they’ll get back down the mountain the same way they got up.
What they may not have accounted for are the changing conditions — inflation, an uncertain economy, changes in tax structure, health issues, long-term care needs — that could make the climb. Accumulating enough money to retire is just half the journey; true success is realized by making that money last as long as you do. An experienced financial professional can help ensure you find success as you come down the mountain.
Reaching the summit
For most people, the ascent up the retirement planning mountain begins in their twenties, once they’ve entered the workforce full time and begin thinking about their financial future. That means most of your life is spent climbing up the mountain. For that reason, many financial professionals focus on this specific aspect of planning for retirement — the accumulation phase.
On your way to the summit, you generally focus on growth. You tend to be less concerned about risk because you typically have more time to recover from periodic downturns. During this part of your climb, more of your assets tend to be in vehicles like individual stocks or returns, but also have market risk. As you near the summit, you may begin to moderate your exposure to market risk, but chances are a good portion of your assets are still focused on high growth.
Preparing for the descent
Too often success is measured by simply getting to retirement. In reality, the true goal is to make it through retirement. Once you’ve reached the retirement summit, your goals shift from accumulation to preservation. A shifting landscape can call for new strategies, in mountain climbing and for retirement assets.
According to the U.S. Social Security Administration, the average 65-year-old male can expect to live to age 84, and females to age 86. 1 Keep in mind, those are just averages. One in four 65-year-olds will live past age 90; one in 10 will live past age 95. 2 With a retirement path that can stretch 20 to 30 years, it can make sense to work with a financial professional — a guide who can help you feel confident on your way back down the mountain.
One of the mistakes too many people make as they near or enter retirement is to just keep doing what they’ve been doing in terms of their investment strategies. Sure, your focus on growth and accumulation got you to the top of the mountain, but those are probably not the things that are going to get you safely back down. The impact of the 2008 financial crisis illustrates this point. In less than a one-year period, American households saw an average decline in the value of stock holdings of more than $66,000.3 At the same time, U.S. households lost an average of $5,800 in income due to reduced economic growth.4 This was a devastating blow for many who were in or near retirement but had kept their money invested in the market in the same manner they had during their climb up the mountain.
The descent is the time when you may focus on income needs — looking for ways to take income throughout your retirement trek. If your financial professional is focused on accumulation, he or she may not be equipped or have the experience to help you find your way to lasting retirement income. There are several paths to income generation in retirement. Bonds, CDs and similar fixed income products lead to protection from market opportunities. Dividend-paying stocks, high-yield more growth opportunity, but can’t protect your nest egg in the process. An experienced financial guide — one who understands products that can help preserve principal and generate income, such as annuities* — can help you find a suitable path, where you can feel confident about meeting your income needs.
In Conclusion
Retirement planning needs will vary depending on what phase of the process you are in. The strategies need once you enter the preservation and income phase. Not all financial professionals are well-versed in both phases of planning for retirement. You’ve worked hard to get to this “summit,” but your journey isn’t over yet. Don’t chance it by going it alone! For a no-obligation retirement income meeting, contact our firm today!1, 2 The Official Website of the U.S. Social Security Administration, https://www.ssa.gov/
