In our glee at discovering how easy it is to buy things we cannot afford, we tend to overlook a workable strategy for incorporating debt into our financial behavior. When we are young and employed, we can support debt to buy a house, buy a car, or grow a business. When we are old and retired, continuing to support debt closes the doors to more pleasant possibilities. In return for tax deductions of present contributions to our IRA and 401k plans, all withdrawals —principal, interest and capital gains— are fully taxable on our state and federal income tax returns. At age 70, plan owners must begin annual minimum required distributions the rest of their lives. Like debt, this pushes the inevitable cost of a present benefit into the hazy future. For many of us, coupling debt payments to the tax cost on retirement plan withdrawals can become unbearable. In our younger years we tend to assume such things will just work out when the time comes. The real glee is available to people who work this out now, well enough to enter retirement debt free with minimal taxes on investment income… for the rest of their lives.
”Pool. It starts with ‘P’ which rhymes with ’T’ that stands for Trouble, right here in River City…” is Professor Harold Hill’s trumped-up but thought-provoking claim in The Music Man. Imagine all 16 billiard balls lying across the surface of a pool table, scattered by the initial “break.” The shots that follow involve aiming a ball to collide with another, imparting the right momentum into the targeted ball to make it drop it into a chosen pocket. Skilled players understand how to plan out multiple collisions to roll the right ball into the right pocket. Sometimes a strategy works out, sometimes it doesn’t. That’s life. The more balls in play, the more options there are available to players. Getting ahead in life is similar: options increase with the number of possible collisions we call experiences. In both games, players need to know the rules and where the pockets are… their goals, if you will. Both are games of skill, and with some study and some practice both can be really, really fun. In either adventure, the right coach can help players to improve their enjoyment of the game… and their scores. Even in River City.
What to do, what to do.. Should I liquidate my portfolio before election day? What will be the impact on the world’s markets of some pretty wild anticipated and actual outcomes? Can the markets behave as badly as some of the candidates? I don’t think so… especially long term. Will the markets survive? Of course they will. We’ve felt these concerns to a greater or lesser extent before every election. We’ll hear once again just how badly the economy will be damaged if the other guy wins, and there may even be noise about taking dramatic steps to protect our investments… but not from me. I’ve been hurt in the market only once, for any length of time: my advisor convinced me that it was unnecessary to diversify my portfolio during the Dot-Com boom. The resultant bust was painful. By the time the 2008-2009 meltdown came along, my portfolio had recovered and was properly diversified at an acceptable level of risk. I learned my lesson, and I pass it along to you now. You stay calm, make sure your investments are balanced and diversified among stocks, bonds, and cash, consider the candidates’ promises, and vote your heart.
As any shopper knows, stores offer different brands that serve similar purposes but in different ways. Which item we choose depends, ultimately, upon which one makes us feel it will be a “good fit.” While financial advisors do not come in different geometric shapes and brilliant colors, they do offer similar services but in different ways… The search for making a good choice starts with a few basic questions, such as “What can an advisor do for me that I cannot already do for myself?” And, “Will the advisor be paid by his or her company’s commissions on insurance or investments I will be asked to buy, or by an agreed-upon periodic professional fee?” And, “Am I looking for financial planning advice to enhance the fullness of my life, or do I just want guidance with my investments… or both?” Based on your answers, your search for a “good fit” advisor can focus quickly on comparisons of age, experience and suitability among the candidates. If you attend Yoga class or take voice lessons or hire a fishing guide, you know such encounters can turn into lasting, satisfying relationships. Keep that in mind when the time comes to seek advice from a financial planner.
The industrial revolution has stamped our brains with a mechanical metaphor for the arc of our lives: work until we wear out or become obsolete, then retire, and then die. On the bright side, my electric hair clippers with the self-sharpening blades are still going strong after fifty years. With a little cleaning and a drop of oil now and then they still hum along nicely. What an efficient design! We too are constructed with elegant engineering. Our brains are designed for self-sharpening, which opens the door to much happier thoughts than the “work, retire, die” scheme we absorbed in our youth. Where daily chores and events deflect many of us from following a path that will keep our brains sharp, remember: who we are and who we will become are energized by our hearts and brains, helping us define who we think we are and who we want to become. We really can strive to stay sharp for life. Once you believe this is a goal worth pursuing, you may find that switching onto such a path can require a mentor… so think about it, search out a mentor, and cut to the chase.
Our internal metronomes resonate within the higher frequencies of global communications, technological innovation, faster sales “turnover,” daily commuting, and a never-ending series of chores we must finish before sundown. The pace robs us of our chance to reflect upon the choices we must make and limits us to a range of two: “yes or no,” “right or wrong,” “good or bad,” “win or lose.” The rapid pace polarizes us as we slide into one or another of two camps that spring up instantly on every issue, public and private. There’s not enough time for “maybe,” “I’ll decide later,” or “do you have a better idea?” The pace of our daily lives has led a few of us to require a mechanical pacemaker in order to maintain an acceptable heartbeat. Others recognize the accelerating shrinkage of time in their daily lives, and consciously make time to consider some third, acceptable option when making their decisions. Making time to choose among at least three options can even out our rhythm and make room for wisdom to work in our lives. The beat goes on, but at a human frequency. It’s worth a try, don’t you think (circle “yes,” “no,” or “I’ll give you my answer before noon tomorrow”)?