In my world, I meet with several people a week. These people vary in age from 40 to 80 most of the time. Time and time again, I find myself meeting with people who have already retired and are finding that their retirement is depleting faster than they had planned. Many unexpected things come up, from medical bills to helping their children and grandchildren out. My clients find themselves selling their dream home to survive. There are a lot of coulda woulda shouldas to talk about, but that is not going to fix their present problem. There is no way to stop a flood without prior planning. Just ask my grandfather about when the South Platte ended up at his front door in the '70s.
The one consistency I find all over is we think we are thinking when we are actually faking. My grandfather told me some marital advice when I was married. He said, "Phil, if you don't know what you are talking about to your wife, just fake it. Make sure it sounds intelligent, though." Of course, that is an absurd statement because my wife checks my story all of the time, and I think Grandpa was just trying to get a laugh, but there is an element of truth to that.
I have clients who have purchased U.S. savings bonds. They don't know how they accumulate interest, they don't know how much they are worth, and worst of all, they don't know if that was the best investment at the time or not. I would love to say this happens only once in a while, but time and time again, someone will say "I heard it was a good investment, so I did it." Other than that rationale, they can not explain the investment.
Well, you say, of course I didn't purchase a savings bond; I invested with the bank. Bank CDs were my investment of choice. Again I pose the question of why. The answers are unanimous: "It is FDIC insured"; "I can keep an eye on it because I know where the bank is"; and the best of all time, "It pays just as good as anything else."
The next person contributes the minimum to the 401(k) his employer provided. They have a fat sum of $60 or $70,000 after 20 years of service. They complain that it was tough in early 2000 and they lost over half. I ask them why they didn't allocate their money differently in the fund or adjust things, and I almost pass out when I hear, "Well, I figured it would go up eventually. I decided to wait, and sure enough it started to go up again."
Think of your retirement like your home. If you didn't clean the house, maintain the lawn, make repairs as needed, and continue to pay on the home, you would not have it. Your retirement is so valuable. Yet we never start trying to work on it until it is too late. My dad always told me to "do your homework." That wasn't for school. That was when I was about to buy a home, a car, a tool, or anything else that required the painful effort of me opening my wallet and paying for it. Make no mistake, it was some of the best advice I have ever received.
Our first step is to stop thinking we are thinking when we are actually faking. Decisions must be supported by facts, data, trends, statistics—and most importantly, will you sleep well after making that decision? Before making an investment, do your homework. All three investments can be good, but are there better ones? Let me know your thoughts.
