Ep 90: How To Create Retirement Confidence

Common Sense Financial Podcast

Show Notes

In this episode, we delve into the link between overall retirement quality and the confidence you have in your financial plan. We emphasize how a well-designed retirement strategy tailored to your needs, not solely reliant on market performance, is pivotal for boosting confidence and making your retirement plan a reality you can rely on.

Addressing common fears, exploring emotional extremes, and understanding the evolving landscape of retirement planning, will help you discover the significance of income-focused strategies and a diversified asset approach in building confidence in your retirement plan.

  • When it comes to retirement, your quality of life in these golden years is often predicated on the level of confidence you have regarding your situation. A poorly-designed retirement plan can often cause emotional confusion, which leaves you feeling insecure and lacking confidence.
  • Confidence is typically at its peak when a plan is optimized and is designed around meeting the needs of the client and not relying entirely on market performance.
  • Retirement confidence is in direct correlation with how well your plan is designed to manage your exposure to risk and its ability to fulfill cash flow requirements. A plan built on hope and optimism can lead to very emotional times when the market doesn’t work out the way you’d hoped.
  • Many client conversations relating to retirement are often centered around insecurities the client is working through.
  • Common fears include running out of money before running out of life, market crashes, having a health crisis, missing opportunities, or simply making mistakes.
  • There are typically two emotional extremes, no confidence or complete overconfidence.
  • A lack of confidence leads to avoidance behavior and avoiding decisions, which often makes a person vulnerable to the very things they are afraid of.
  • Overconfidence leads people to underestimate their vulnerabilities.
  • Being skittish or practicing decision avoidance or fearing the idea of making a bad decision are all confidence killers, and the ultimate irony of this behavior is actually preventing the solution from being implemented, which can turn your fears into a reality.
  • Confidence is about being able to rely on your retirement plan to do what you need it to do. If your retirement plan is anchored to the stock market, your confidence level relies entirely on the performance of the market.
  • Most people’s retirement plans involve a stock market portfolio they plan to liquidate over time, Social Security, and a pension, but that’s really just the start.
  • This paradigm seems to be rooted in watching our parents or grandparents work for decades in the same job and then retire with their pensions and Social Security benefits. However, circumstances have changed, and what worked back then isn’t going to cut it now.
  • Pensions and company-provided retirement plans have been on the decline since the 1980’s. Baby Boomers started putting their money into retirement plans starting in the 90’s, which caused a growing stock market. 2016 was the first year that Baby Boomers started taking out money from those accounts.
  • Those who ran the markets up are now the same group that is putting selling pressure on the markets, but there are other influences as well: government spending and policy, Fed policy, pandemics, interest rates, inflation, and more.
  • When you lack certainty in the market, algorithms and a 24/7 news cycle can exacerbate the situation.
  • There are two fundamental things that can have a profound impact on your retirement confidence. First is solving for income using income products. The foundation of a retirement plan is to generate consistent income, and unfortunately, consistency is not synonymous with the stock market.
  • Separating your assets between long-term growth in public investments and income-generating private and fixed assets is a crucial component of being confident in your overall retirement plan.

Mentioned in this episode:

BrianSkrobonja.com
Common Sense Financial Podcast on YouTube
Common Sense Financial Podcast on Spotify
Common Sense: YOUR Guide to Making Smart Choices with YOUR Money by Brian Skrobonja
Brian’s article – ‘Five Common Retirement Mistakes and How to Avoid Them’

References for this episode:

https://www.dol.gov/general/topic/retirement/erisa
https://www.thestreet.com/personal-finance/baby-boomers-could-cause-market-crash-12117996
https://www.forbes.com/sites/lizfrazierpeck/2021/02/11/the-coronavirus-crash-of-2020-and-the-investing-lesson-it-taught-us/?sh=17701bd846cf
https://www.marketwatch.com/story/u-s-stocks-would-be-much-lower-if-it-wasnt-for-excessive-government-spending-morgan-stanleys-mike-wilson-says-1b8e65d2
https://www.nasdaq.com/articles/what-does-the-fed-do-and-how-does-it-impact-the-stock-market
https://thefga.org/blog/president-biden-is-wrong-about-esg-heres-why/?gclid=CjwKCAjwvfmoBhAwEiwAG2tqzIhc3F2QbmLEygcbkIg9eV7bhXUz3dzXhO1A_hTNE3hNsMbTug59txoCPcwQAvD_BwE
https://centerpointsecurities.com/stock-market-algorithms/#:~:text=The%20main%20thing%20traders%20need,because%20you%20may%20lose%20fast.
https://www.statista.com/statistics/191077/inflation-rate-in-the-usa-since-1990
https://www.bankrate.com/banking/cds/historical-cd-interest-rates

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