This isn’t going to be my regular, “informative financial planning post,” that could have been generated by some AI bot. This is real life.
If you’ve followed me at all over the years you might remember my saying, “life throws curveballs.”
You might think you have your career all figured out, then your boss gets fired, you’re not the new guy’s favorite anymore, and not long after, you’re out the door. Curveball.
You probably think you’ve figured out the market, that you’re a stock picking whiz. Then the financial crisis hits (or the dotcom bust, etc.) and it turns out you were just another investor floating & sinking with the rising & falling tides of the market. Only the tide goes out when you needed the money. Curveball.
You retired at the perfect time. You saved all your career & all you see is smooth sailing ahead. Then your husband runs into a health issue that costs you over a tenth of your net worth every year. Now, instead of building a charitable foundation, you’re budgeting for the first time in your life. Curveball.
I don’t want to sound like a doomsayer. I am actually, as Madi Diaz would say, a, “fatal optimist.”
But I also live in the real world, and I’ve lived long enough now to have seen & experienced some of those curveballs. More than some, less than others, but enough to know better now.
When I decided that I wanted to get into personal finance as a financial advisor, I made short list of things I needed to do. I needed to run the business in a way that made sense for both me and my clients. I needed to ramp up my planning chops outside of investments, which I had covered. And I knew I needed to be a different kind of advisor than the industry norm, so I had to find folks who also thought differently.
One of the first thought leaders I was introduced to was Jim Otar. He said the quiet part out loud, that a significant contributor to your retirement, “success,” is luck. We can’t control, for instance, inflation, sequence of returns risk, or health issues. But importantly, especially for a planner like me, this doesn’t mean we throw up our hands & leave everything to the fates. No, it means we do as much as we can to affect the manageable risks, like withdrawal rate, asset allocation, and portfolio costs.
Why? Because if we do those things correctly, we at least reduce the impact of the luck factor.
Does this mean that if we do all of those things right we’ll be ok? The fatal optimist in me wants to tell you, “yes,” but the realist in me knows that’s not the right answer.
Sometimes hard decisions will have to be made. Sometimes we just won’t get the retirement that we dreamed of, which can be the same retirement that seemed totally guaranteed just a short time earlier.
If you made it this far, you may still be wondering why I’m writing such a downer of a note. As financial professionals, just like doctors, we spend most of our careers cultivating an ambivalence that exists for mental self preservation. It’s inevitable that we’ll see suboptimal situations. Often painful situations. We can’t let that affect us too much, or it would make the job too difficult. When a few of these things overlap, however, even we get emotional.
My mom and dad, being children of the Depression, were super responsible money-wise. They never made much, but they saved & invested diligently. They retired in the 1990s and were able to live comfortably in retirement. My dad died in 2018 at 96 and my mom is still around at 95. After my dad died my mom became more worried about money, so we went through her finances. I calculated that she could live until 104 with no problems, and if we made it that far, we’d figure it out. Well, fast forward a few years and those curveballs came. She fell and broke a hip, which required rehab & in-home help during recovery. While she worked hard & got back on her feet (haha), it wasn’t long after that she needed some help every day. None of this is inexpensive, and the 104 has been drifting closer and closer to current age. I confess that I don’t yet have a good financial solution if my mom (God willing) keeps chugging along.
At the same time that my mom’s situation is front & center in my personal life, I’ve had two different clients experience family health issues that are materially impacting their plans. These are all health related curveballs, and there’s no getting around them. Keep yourself as healthy as possible for as long as possible, eat right, exercise. Take care of your body. Do all of that & you positively affect those manageable factors, but you can’t outrun bad luck. It was the weight of all these things that spurred me to write here.
Unfortunately, I don’t have a magic shield against bad luck. The good news is that not everyone experiences it, or in a material way. I also don’t write this to keep you awake at night worrying about how luck could torpedo your retirement. I do write so that if you haven’t thought seriously about it before, you might start. If you’re considering FIRE for instance, especially lean FIRE, maybe add back in a touch for bad luck. Or better yet, talk with your family about what you might do if your luck turned. This is why militaries constantly wargame scenarios. They know the only thing guaranteed about their wargames is that none of them will occur in real life exactly as played, but at least they’ve worked through different scenarios, expanding their mental & physical armamentarium.
I’m a planner. Always have been for some reason, so thinking things through comes naturally to me. If that’s you too, great, but if it isn’t, I’d encourage making some effort to improve that skill. Luckily, there are plenty of podcasts & blogs to point you in the right direction nowadays, from The Bogle Center for Financial Literacy to ChooseFI to Catching Up to FI to Facebook groups like Retirement Planning Education.
If you would like any other specific links or sources, reach out & I’ll see if I know a good one.
Oh, and good luck.