Sharing the article below from Danielle Howard of Marketwatch.com. In it, she identifies three “myths” of retirement, which if believed can lead to retirement calamity rather than security. Her corresponding “truths” point to the reality of the matter – that retirement can’t be boiled down to simple rules, that each experience is as unique as the individual doing the retiring, and that retirement security and contentment is achievable for everyone, especially if you are willing to do the work necessary to sustain it.
Myth 1: As long as I stick to the 4% rule, retirement distributions will be a breeze.
In 1994, financial planner William Bengen, researched a variety of withdrawal rates on a retirement portfolio (all assets lumped together). Using historical returns, he found that 4% was the highest rate that was sustainable over a 30-year period. It has been the status quo for the past 23 years.
The truth: Your financial scenario warrants much more thought and strategic planning.
You need to consider that there will be different cash flow needs during your “go-go”, “slow-go” and “no-go” golden years.
How do you create sustainability for the life expectancy and variables you will encounter? It is imperative to understand how taking money out of different “buckets” will affect your taxes in ever changing tax environments. You want to coordinate the best way to tap Social Security, pensions, personal retirement accounts, annuities, and other income resources. What is the current economic environment? Are you exposed to interest rate risk, or sequence of return risk? We have moved into a rising interest rate season, rising the risk in bond prices.
We continue to see market volatility and have seen market expansion since March of 2009, boding well for past distributions. What if we incur a major pullback or recession? It isn’t a matter of if, but of when. Consider the impact on your portfolio of taking money out in a down market — this is managing sequence of return risk. Have you considered what you want to leave for family, or causes close to your heart? Creating a strategy based on the complexity of your financial resources, will optimize how you use your resources today and create the legacy for tomorrow.
Myth 2: I’ll won’t have enough money to retire.
This is actually two myths in one. First, the mind set of scarcity. This myth has a firm foothold in many a conversation before retirement and after. Scarcity can consume our days “I didn’t get enough sleep”, or “I didn’t get enough done” to our personal self worth “I’m not smart enough, pretty enough, young enough, old enough”. This mind set manifests in the unquenchable quest of more and the hope that more will satiate our souls. Second, the myth that retiring to a life of leisure will provide you with fulfillment. White linen and cocktails on the beach may sound enticing and can be a nice facet of your retirement, but you will find self-gratification lacking as your sole pursuit.
The truth: You have enough and are enough to create a satisfying, consequential life.
No matter your financial means, if you have a roof over your head, food on your table and clothes in the closet, you are financially better off than 95% of the rest of the world. We need to change our perspectives and our attitudes. Embracing an attitude of gratitude will release you to fully enjoy everything, every day.
It will help you to create a vision of your future that is full and significant. Many have said and affirmed “what you appreciate, appreciates.” With a mindset of gratitude, sufficiency and abundance, let’s dismantle the myth of the traditional retirement. You have spent a lifetime gleaning wisdom and building wealth in more areas than your bank account — keep it all working for you and through you.
Let’s redefine the golden years. What are you rewiring for, instead of retiring from? How do you balance vacation with a vocation? How do you use what you have, in the best way possible, creating the next best version of yourself and propelling you forward in a life of purpose and passion?
Myth 3: I don’t need to plan, I did that in the ‘accumulation’ phase.
You set your goals, you diversified and rebalanced. You did a lot of things right. You have resources in your “bucket”. You attained your “number”. You did a lot of things right — congratulations. Now that the distribution phase is here — now you can sit back and relax.
The truth: You worked so hard to get here, you owe it to yourself to make a plan.
When you combine the intricacies and nuances in your financial resources, along with the emotional, psychological, spiritual, relational and physical changes that lie ahead of you — why wouldn’t you plan?
You can spend your life in reactionary mode or take the proactive approach, embrace change and find the right team to walk alongside you to accomplish what is important. Do your homework, then set to task.
It is not about a product, but a process. It is about making course corrections along the way, knowing that life is full of bumps and there is no perfect recipe for success. It is about being intentional, thoughtful and joyful along the way. It is about living in your full potential, utilizing your true wealth. With the right financial advocates and guides to help you steer on an increasingly complex journey, you will have a better opportunity to savor the moment and decrease the likelihood of future regret.