My wife and I like to climb mountains. Any mountains. Small mountains like Crowder Mountain near Charlotte, bigger mountains in the Northeast like Mt. Washington and Mt. Katahdin and even more imposing mountains out West, like Mt. Whitney, Boundary Peak and hopefully soon, Mt. Rainier. We like a challenge, we like snow, we like new experiences, we like to learn new things, and we like altitude. When our friends and family know we are getting ready to travel to a climb, they say something like “Good luck getting to the top,” or “I hope you make it to the summit,” or “send me a picture from the summit.”
Although the sentiment is kind and appreciated, it implies that the primary goal is to get to the summit. And, of course, we hope to make it to the summit; we wouldn’t be doing this if it wasn’t for that unbelievable feeling of accomplishment that sets in when one is standing on top of one of the highest points in the United States…when everything is below you, sometimes even the clouds. But the real goal is to get back down the mountain safely. Getting to the summit can be very challenging, but many of the big risks occur during the descent. Just ask any mountaineering guide. They will tell you that getting to the top is optional, getting down is mandatory!
So what are some of these big risks? Well, most likely you are tired from the ascent. You have exhausted various muscle groups just to get there. You may have felt the impact of thinner air at altitude. Couple that with the steepness of the descent, and you have a perfect recipe for injury, either from falling or muscle overuse. Much of the descent on higher mountains is made “above tree line” meaning there is no protection from the elements. If not careful, one can find themselves unprotected from afternoon thunder storms, or in some cases, afternoon snow and ice melts.
How about resources like food and water? If too much was consumed on the way up, there might not be enough for the way down. I can tell you several stories about having to share water with dehydrated climbers. Many climbers mistimed their ascent, meaning that they started too late in the day or took too long to get to the top. Invariably, this can cause some of the descent to be conducted in the dark or worse, it can cause some to have to spend an unexpected night on the mountain. Some climbers have even been guilty of wanting to get down so much that they try to take shortcuts and end up getting lost.
So, how does this apply to your personal financial planning and specifically to your retirement planning? Professionals in our industry and many families tend to focus most of their energy on getting to the point where they can retire, getting to the summit, so to speak. Just pay attention to the advertising on TV: the “what is your number” campaign comes to mind. Don’t get me wrong, saving and investing and planning to get to a point where you can maintain your standard of living in retirement is important, but your work doesn’t stop there. I can’t tell you how many people have said “I’m so glad I have made it to retirement, now the hard work is over.” Imagine the look of surprise when I tell them that my work on their behalf as their advisor is about to increase.
You see, the big risks aren’t felt on the way to retirement. You are working, saving and investing. If you miss a few months of work due to an injury, you likely won’t run out of money. If you are not saving enough, it probably won’t cause any discomfort during your working years. If you don’t pay a high level of attention to your investments for a year or two, you probably won’t feel the difference – while you are working. It’s like climbing to the summit – you can be behind schedule, use a lot of your resources, even get lost a time or two and still make it to the summit. But, oh will that impact your success on the way down!
Your goal isn’t simply to make it to retirement, it’s to make sure you get safely through retirement without running out of money. Sure, the actions you take during your working years will impact that goal, but more importantly, the actions you take during retirement will have an even bigger impact. And, just like when we get to the summit, you will be tired. Tired from working, saving, investing and stressing. You are going to want to enjoy retirement – but, be careful, don’t lose your focus. You must stay vigilant all the way down. Just ask anyone who has run out of money and is forced to move in with their children or go on Medicaid late in life. It’s just as bad as being forced to spend the night on a mountain in 20 degree temperatures with no food, water or shelter. Well, probably worse because your situation will last longer than one night.
So, what are the things that can go wrong during retirement? You lose vigilance because you are tired or distracted; you assume that you should be investing the same way you did on the way to retirement; you spend too much money; you fail to realize that you need to downsize your home; you don’t have a plan to handle years when market performance is poor; you have unexpected health care costs; children, grandchildren or parents consume your resources; one of you passes away; inflation and taxes eat away at your purchasing power; you need to hire someone to help you with the daily activities of life; you fall prey to an unscrupulous sales person who wants to take advantage of you; you make less than optimal “permanent” decisions about social security and pensions, you make incorrect decisions about what accounts to withdraw from and how to take required minimum distributions. The list of risks goes on and on.
I hope I have your attention – and that I have expanded your point of view so that you are sufficiently concerned about the importance of focusing on “getting down safely.” That needs to be your goal. So what do you do next? Develop a repeatable process that you can use every year to address the challenge. Getting down the mountain isn’t a plan once and forget about it process, it continues all the way up the mountain and all the way down the mountain. So does your retirement planning, it continues all the way until retirement and all the way through retirement. If you don’t have a reliable process, hire a wealth guide. My wife and I aren’t shy about hiring guides to help us on challenging mountains. At Second Half Strategies, we specialize in this type of planning since getting to and through retirement are all of our clients’ largest goal.
Remember, without getting down safely, getting to the top really doesn’t matter. Let’s try to make sure that you don’t get caught on the decent and stuck out on that mountain!
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