What is the biggest impediment to successful retirement planning? People have trouble projecting things outside their normal time envelope. People can remember three years ago with a little difficulty and they can estimate the future out to about another three years. They live in a six year space and things outside it are quite unclear.
You need to trust to get retirement finances right. Trust your investment plan. Trust your required saving. Trust that you have methods to deal with the unforeseen. Disability income insurance is an important part. Even though the outcome will not show up in your time envelope, you must participate in the process.
The problem becomes this, “I knew I would get old, but I didn’t think it would happen so soon.”
The only defense is information. Trust comes from understanding. Understanding investment markets. Understanding the power of compound interest and the essential variable of time. Understanding yourself. Discipline.
People can give themselves an edge by starting early, even if for tiny amounts of saving. The earlier you start, the earlier you will begin to experience the ups and downs of markets. They are normal and people who start late and with larger amounts of money become too risk averse.
When you create a portfolio to supply income 40 years from now, the day to day variations are not so important. You can deal with them rationally. People who do not understand the fluctuations and think of down as losing money, will tend to respond poorly. Understanding investing is a very useful skill for a young person.
People who understand investing and understand the time scale make better decisions around the spend versus save decision. There are impulse purchases that add little to life but could make a big difference in the saving level.
People who get the meaning of their plan have no trouble with these. Planful and persistent is the route to success.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. email@example.com 866-285-7777