It can at times seem like life is a seesaw of logic and emotion. If you believe by emotion, then no amount of reason can talk you out of how you feel. It’s how some fall prey to a life of worry, frustration and disappointment. But if you stay focused on what matters most right now, then your logical brain will talk you out of your fear and making bad decisions. This is reinforced by the famous book 7 habits of highly effective people by Dr Stephen Covey which discusses circle of influence and circle of concern.
It’s not a pandemic issue
What we’ve observed in our practice is that many of our retiree clients tell us how stressed and anxious they used to feel when there’s a dip in the market. When you suffer a loss, you always think about ways to catch up. With or without a pandemic, it’s a recurring thought, right?
Your confidence starts to wane. You start to worry. You start to question the point of investing. You worry about your capital depleting. You worry about how much you’ll be able to pass on to your children. Then, you ask yourself how you’ll survive knowing that your retirement assets are falling in value.
Your emotions are telling you to panic but your logic tells you it’s part of investing.
3 stages of wealth
You’ve spent your whole career saving and sacrificing so that you can save enough money to have a comfortable retirement. It’s a common goal.
You’ve been building that nest egg for the future. You were willing to forego instant gratification in exchange for a long-term reward. And that’s why you’ve done such a great job accumulating as much wealth as you can.
Now you’re retired, you want to keep that level of wealth until you die.
Here’s the thing. Accumulating wealth is only the first step in the 3 stages of wealth. On retirement, the next steps are wealth management and wealth distribution.
Stage 1: Wealth accumulation
When you retire, you’ve only just finished stage 1 and now ready to move on to stages 2 and 3. Let’s examine what’s at work here.
Say, for example, you’re feeling unhealthy and want to lose some excess weight. So, you started eating less and moving more. Great. Now, you’re in perfect shape and within a healthy weight. You’ve achieved success. But if you keep eating less and losing more weight, you’re going to fall off the edge and then you’re back to being unhealthy again. And that’s the point. Just like wealth accumulation, you need to know when stop.
The point here is to know how much you need to accumulate in order to generate passive income to live the lifestyle you want in retirement. There is no point working additional years to build more money that you don’t need.
Stage 2: Wealth management and distribution
Retirement is when you reach a stage in life where you begin to manage and distribute. It’s desirable, but not essential, for you to maintain your assets’ market value for the rest of your life.
It’s ok for your assets to fall in value. It’s ok if you die with less money than you have today. What we don’t want is for you to die with no money. What’s important is that you have enough money to live the lifestyle you desire for the rest of your life.
This is an important point because while we will help preserve the number of assets you have for your family when you pass on, your financial well-being comes first.
Your ability to receive sufficient income to provide for your needs, for as long as you’re going to live, is our priority. Fear and worry are bad for your health.
Stage 3: Wealth and happiness
These are turbulent times. There’s a global health crisis and the markets are volatile. Chances are, you feel frustrated about all the financial ‘noise’ out there which is designed to make you scared and worried calling the end of the world. We already have our clients money back.
The good news is, now that you’re retired, you don’t need to worry too much about sudden market movements, lost asset value, or dipping into your capital if you have a properly structured retirement income plan
Instead, what you should be focusing on is this: will you be able to generate the income you need to provide for your needs? If the answer is yes, then you can relax knowing that you will enjoy the financial security you’ve worked so hard for.
If the answer is no and you feel you may run out of money, then we need to have a conversation.
If you have family or friends who don’t have Financial Adviser to help guide them through any financial decisions, please refer them to us. We’re happy to help. Book a chat with us here.
