By James E. Wilson
With few exceptions, the individuals that come to us seeking advice are stressed out. Some of this stress is owed to our general cultural taboo of talking about money issues. An even larger part, however, is generated physiologically and is simply part of how our brains process information.
Successful individuals have many questions about financial planning, investing, and retirement.
Here are those that we hear most often and my short, perhaps uncommon answers.
1. Can I “beat the market”?
No, except by chance (luck).
2. How much of my earnings do I need to save/invest for retirement?
Very likely more than you are currently. I can count on one hand the number of pre-retirement clients who are truly saving enough.
3. Do I have to invest in the stock market?
Yes, if you want to retire and sustain your lifestyle beyond your working years. Simply put, stocks have been (for more than 90 years anyway) the most reliable way to offset increasing living costs (inflation).
4. Can I get out of the market when things are unsure?
No - not if you want to be financially secure. Trying to time the market is a fool’s errand. The broad stock market is positive about 54% of the months but 75% of the years. The key is to have enough in cash and bonds to ride out the inevitable temporary pull backs, some of which last last a couple years or longer.
5. Isn’t real estate a safer investment than stocks?
No - the data for most time frames tell us differently. Residential real estate provides enjoyment and utility but the long term returns adjusted for inflation are very small.
6. What about market indexed annuities? Are these a good idea?
No, no, and again no. The costs and structure overwhelm any positives. Everything the insurance company can invest in, you can do as well, without the heavy sales and marketing costs.
7. What percentage of my pre-retirement income will I need in retirement?
Likely a far higher percentage than you think. While this varies depending on a multitude of factors including age, health, lifestyle, and debt to name a few, 80% of pre-retirement income is a good starting point.
8. I like to be in control. Can I control investment outcomes?
No - investment control is an illusion. You can influence outcomes by focusing on your inputs: how much you save, how the investments are allocated, and how well you behave (staying in your seat).
9. Can’t I just manage my financial life on my own?
Yes indeed…it’s just impossible to manage your emotions and inherent behavioral biases. Investing is fairly simple, but incredibly difficult all at once.
10. I don’t like change. Will I need to change anything in order to move along the path to financial security?
Yes, yes, and yes again. The status quo is a huge barrier to financial health. You need to break away from the “comforts of inertia” into the uncomfortable space where growth occurs.
11. What is the Number One problem most financial advisors see?
Clients are overwhelmed by complexity and advisors need to focus them on the important points so that good decisions can be made.
Questions abound in financial planning and answers to these questions should be firmly rooted in reality. Finding your path toward a secure retirement is key.
Lawton Retirement Plan Consultants, LLC (LRPC) Monday Morning Minute is crafted to provide decision-makers with important information about the economy, investments and corporate retirement plans in a format that allows a reader to consume the information in less than 60 seconds. As an independent, objective investment adviser, LRPC has access to many sources of research and shares the best and most relevant information with its readers each week.
Lawton Retirement Plan Consultants, LLC (LRPC) is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to employer retirement plan sponsors. The firm specializes in Socially Responsible Investment (SRI) strategies for retirement plans and is a pioneer in the field. LRPC currently has contracts in place to provide consulting services on nearly a half billion dollars in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or firstname.lastname@example.org or visit the firm’s website at https://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, a plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges, and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.