Why Living in the Moment is Critical to Your Retirement Plan

photo-1441716844725-09cedc13a4e7On a recent Saturday morning I ran along a wooded trail near where I live that leads to a set of soccer fields. As I rounded the corner and came out of the woods I saw kids playing soccer in their little green and white jerseys. Parents and grandparents were lined up on the sidelines cheering them on, their morning lattes in hand.

I felt like had stepped into a time warp that took me back to the days when my girls used to play soccer on those same fields.

Those were good times and great memories.

As a financial planner I am always thinking ahead, living in the future. I plan retirements for other people as I daydream about my own. I often think things like “When the kids are older…” “After the kids are in college…” Or my personal favorite, “Someday when I retire, I would like to…” You can fill in the blanks.

I am sure you have had similar thoughts. Or yours may go like this: “When the market gets better…” “After I pay off these bills…” “As soon as my pension kicks in…”

While planning for the future is important, don’t let it get in the way of getting the most out of your life today. Unless you live a full and fulfilled life before you retire, it’s unlikely that you will do so after you retire. That’s why living in the moment is critical to your retirement plan.

Live a life of no regrets. In her book, The Top 5 Regrets of the Dying, Bronnie Ware writes about the most common regrets people have at the end of life. I won’t give away all 5 here, but #2 on the list: “I wish I didn’t work so hard”.

I try to be extra mindful of this one. Before I got married and started a family, I worked all the time. Nights, weekends, holidays, it didn’t matter. For that time of my life, it made sense to put in the hours. Today, things are different. (Thankfully!)

As focused as I am on my long-term goals, I try to remember to live in the moment and make the most of today. What is the point of a confident retirement, if it means sacrificing two or three decades of your life up to then?

That’s why you won’t see me in the office when my kids are out of school. It’s also why I limit my late appointments to just a couple per week, and I am very selective about the new clients I take on.

If you are not doing so already, start a new hobby or develop an existing one. Join a small group at your church. Find a way to serve your community that gives you a sense of purpose. Heck, just go for a bike ride with your kids or take your dog for a walk on a regular basis. It doesn’t have to be complicated.

Use it or lose it. According to an article on CNBC.com the average American worker uses only 77% of their paid time off. In fact, unused vacation time is at a 40-year high. While some people may be able to roll unused vacation time over to the next year, the average worker loses 1.6 vacation days per year.

That doesn’t sound like much, but it adds up. Think of it this way. If you spend just 3 extra minutes per day at the copy machine, that adds up to over 1.6 workdays per year spent staring at the walls making copies. Since paid vacation is part of your total compensation, losing paid vacation days is the equivalent of working for free.

If you want to spend 1.6 vacation days making copies, go ahead. Me? I’d rather be at the lake.

Live in the moment. Living in the future is a habit I have developed that isn’t always healthy. I need to remind myself to live in the moment and make the most of today.

To get the most out of your life in retirement, you need to do the same. When I create retirement plans for clients I recommend they save up to 20% of their income for their future goals. The other 80% is spent on day-to-day life.

I think that balance makes sense in other ways as well.

Set aside a percentage of your income to meet your long-term goals and spend the other 80% of your time, money and other resources living for today.

At the end of life it’s not the things you did, but the things you wish you had done that you are most likely to regret. Don’t spend life in retirement wishing you had done more living before retirement.

Two Rules My Grandmother Had About Money, and What They Mean For Your Investments

Betty Kelly 3.4.24

Betty Kelly 3.4.24

When I was a kid my family would sit around and play cards for money – usually nickel ante poker and games like that. The stakes were never very high, but it was enough money in those days that a kid could get into some trouble if he wasn’t careful. A big pot might be $50, but in 1978 that was a lot of money.

Rule #1: Don’t risk what you can’t afford to lose.

When I started to play with the grown-ups, my Grandmother had one rule: “Don’t play with money you can’t afford to lose”.  I believe the same is true for investing. To be sure, investing is not the same as gambling, and gambling is definitely not the same as investing. However, both have risks and, in my opinion, the shrewd investor never risks more than she can afford to lose.

With investing one of your primary risks is that you may lose principal at a time when you need to access your money. Parents investing for college may experience short term losses right before they need to make a tuition payment. People in retirement might suffer market losses as they are taking distributions from their accounts.

One way you may be able to address this is to avoid putting your principal at risk when your time horizon is short. It is a good idea for retirees to have income sources and assets they can tap into that don’t require liquidating shares that have been beaten down by the markets. Parents of college students may also want to have resources available to pay tuition bills without having to tap into stock related investments when the market is down.

Rule #2: Always go with the odds.

After learning Rule #1 the hard way a few times, my Grandmother imparted her second piece of financial advice, “Always go with the odds”. Drawing two pairs is a lot more likely than holding out for an inside straight. With investing for long-term goals such as retirement and college, you may want to go with the odds as well.

The stock market doesn’t always go straight up. (Maybe you have noticed.)  In fact, there are many years where it doesn’t make money at all. 2000, 2001, 2002, 2008, to name just a few.

On any given day stocks are generally more volatile than bonds. Past performance, of course, doesn’t guarantee anything, but since 1926 the S&P  500 Index has outperformed 10-year Treasury Bonds on a rolling 10-year period (measured quarterly) 85% of the time – according to the Leuthold Group a Minneapolis -based market research firm.

For most long-term investors it may be a good idea to place a portion of your investments into stocks and stock related investments, but no more than you are comfortable risking given your investment time frame.

What’s the right balance for you? That depends on a variety of factors including your risk tolerance and time horizon among others.

Tuesday, March 4th, would have been my Grandmother’s 95th birthday.  For her the idea was to stay in the game. By reducing risk and going with the odds you are able to stay in the game when others have long since folded. Keeping her two rules in mind when making your investment decisions will help keep you in the game as well.

Important Birthdays Over 50


Photo by Jorge Ibanez on Unsplash

My family has a lot of summer birthdays. My wife and I, both our kids, my dad, two of our siblings, a few aunts and uncles and several cousins all have birthdays within a few weeks of each other.

When my kids were little, they thought everyone had a summer birthday.

This summer my oldest will reach the first of many milestone birthdays: 16! And you know what that means: Vroom, Vroom and Cha Ching!

When you are older, milestone birthdays continue to roll on and eventually even “and-a-half” birthdays start to make a comeback.

In fact, starting at age 50, several birthdays and “half-birthdays” are critical to understand because they have implications regarding your retirement income.

10 Things To Know About the Required Beginning Date For IRAs

This article, written by Ed Slott IRA Analyst, Sarah Brenner, originally ran on The Slott Report.

Photo by Anthony DELANOIX on Unsplash

Adding money to an IRA is easy. Knowing when and how to take money out of an IRA while complying with all the rules and regulations surrounding IRAs and retirement plans — that is the tricky part.

All IRA owners must begin taking Required Minimum Distributions or RMDs from their IRA by April 1 of the year after the year they turn 70 ½.

But the rules don’t stop there.

This article, written by Ed Slott IRA Analyst, Sarah Brenner, originally ran on The Slott Report.

You can learn more about IRAs from Ed Slott and his team, by clicking here.

2019 IRA and 401(k) Contribution Limits Rise

 

The personal savings rate in the United States hit 6% in 2018.  Relatively speaking that’s not a bad number.  Unfortunately, it probably won’t get you to your long-term financial goals.

It may sound obvious, but if you want to have more money when you retire, you are going to have to save more money when you are working.

Fortunately, the annual limits on how much you can contribute to your IRA, 401k and other workplace retirement savings plans are pretty generous. What’s more, they’ve been increased for 2019.