Persistence Pays Off

Monday, October 1st

Did you see Tiger Woods win the PGA Tour Championship in Atlanta last weekend?

 

It was his first win in 5 long years.  After four back surgeries and limited play in the last couple of years because of nerve and back pain, he finally got his 80th PGA tour win.

The crowd was thrilled for him.  His friends and fellow golfers were elated.  Everyone who has been a fan was overjoyed at his victory.  And I have to admit that I, too, was cheering from my living room couch.

Tiger himself was overwhelmed.  “I was pretty emotional when Rory […] was finishing out,” Woods said. “I looked around, and the tournament was over because I’d already put the bunker shot on the green, and I’d won 80.  80 is a big number. I’ve been sitting on 79 for about five years now, and to get 80 is a pretty damned good feeling.”

As amazing as the achievement of 80 tour wins is, the real delight for people came because of the huge comeback Tiger had to make in order to do it.  When it looked like he might never be the same, he clawed his way back to the top.

What it said to the world is: Persistence pays off.  Dogged determination towards a goal gives you results.

It’s no different when it comes to your retirement goals.  You have to keep at it.  Even when there are setbacks.  Even when it looks like you will never get there.  You have to keep working and striving and moving towards your target.

When it comes to properly preparing for retirement, I think it’s good to keep in mind that there is no real finish line.  There is only another step in the journey.  No matter what stage of life or stage of retirement you are in, there is work to be done to reach your goals.

Accumulation – The accumulation phase begins with your first job and continues until you are about five years from retirement.  When you’re in the accumulation phase of retirement, of course, it’s a slow and steady climb of putting money away, being disciplined with your savings, and investing with smart but assertive growth strategies.

The challenge in the accumulation phase is the duration of it.  Consequently, two things can happen to people in the middle of the accumulation phase.

First, there is a temptation to procrastinate serious accumulation because it seems like you have lots of time to get to your goal.  People get easily sidetracked in this phase, trading progress towards retirement goals for much more “pressing” and current priorities.  Rather than continuing up the retirement mountain, resting or taking side trips starts to be the norm.  Before you know it, the steady climb has to turn into an all-out sprint.

Second, because the amount you need to save for retirement seems so large and so daunting, it starts to feel like you aren’t actually making any progress.  People get discouraged with small monthly allocations, with the nearly imperceptible movement towards their goal, and struggle to stay excited and engaged.  The hard work required is neither noteworthy or obvious and without significant feedback, enthusiasm for the long slog wanes.  Giving up altogether can start to look like the more attractive option.

The key to successfully managing this phase is to keep the right perspective.  When the goal seems insurmountable, zoom in and think about what you can do this month or this week to take one or two small steps towards retirement.  When the weekly and monthly grind feel too arduous, zoom out and remember the big picture—what you are really working for, what will it look like at the end when you have the nest egg you want.  This will give you the energy to stay engaged long term.

Preservation – Before you know it you are in the preservation phase.  This phase starts about the last ten years of retirement and continues throughout your entire retirement.  The primary goal of this phase is to keep the money you have worked so hard to accumulate.  The investing strategy moves from one of growth to a more conservative approach designed to protect and preserve your nest egg so that it will last throughout all the years you need it.

There are challenges in this phase as well.  We find that one of the biggest for our clients, is moving from a growth mindset to a low risk, conservative investment approach.  This is a big shift in philosophy and strategy and it can take some getting used to for a couple of reasons.

One, is that most people have pursued growth for so long, that it’s what they know.  It feels somehow wrong or foolish to slow down or change course.  They have operated aggressively to reach their savings goals and downshifting feels foreign and misguided.  (Perhaps, a little like changing your golf swing in the middle of your career.)

Another reason switching to a preservation investment strategy is hard is that we have a fundamental human fear of missing out.  We want what everyone else has.  Many of our clients are very tempted to forego a conservative approach when they hear about or witness other people making huge gains in the market.

It is important to remember that the preservation phase serves just as important a purpose in your retirement strategy as the accumulation phase.  Major market corrections can delay or cancel retirement plans.  After working so hard, don’t let the change in tactics derail you from your ultimate goal.  Again, the right perspective can help.  Keep your eyes on your own lane.  Turn your focus away from other people and refocus on your own priorities.  This will give you the strength to stay the course.

Distribution – Coinciding with the preservation stage, is the distribution phase of retirement.  This is, obviously, when you start drawing on your savings and investments for income.

This might seem, at first glance, like the easiest phase to navigate—Show me the money!—but in many ways this phase requires just as much discipline and perspective as the other phases.

The biggest threat in this stage of life, of course, is running out of money.  In order to avoid this, you need to carefully direct when you take withdrawals from which accounts in what amounts.  You want to have your money diversified into different kinds of investment accounts that have different income efficiency and even different tax consequences.  This will give you lots of options to choose from and allow you to make withdrawal decisions based on current market conditions rather than being forced to withdraw money strictly out of financial need even when conditions are less than ideal.

The focus of this phase is sustainability.  This is where having the right plan can make all the difference.  A good plan gives you freedom during distribution.  Rather than just hoping your money will last, you have a solid response in place for every contingency.  When the markets are up, you plan to withdraw from a particular variable account at a certain rate.  When the markets are down, you can draw from a guaranteed income account, again at a specified rate or amount.  If your spouse dies and guaranteed income streams change, you have a plan for that.  While you cannot predict, you can prepare.

You can navigate this phase successfully by trusting and sticking to your plan.  This will give you incredible confidence and peace of mind as you enjoy this final stage of your retirement journey and the fruits of all your years of labor.

Just as I celebrated with Tiger Woods this past weekend as he fought against all the naysayers and the obstacles and the odds against him to come out victorious, I am excited and thrilled to watch my clients succeed in their personal retirement goals.  They are up against a lot.  There are plenty of challenges along the way.  But, in retirement preparation, execution, and persistence pays off.  Dogged determination is always the way to reach your goals.

With the right strategies, plans, and perspective in place, you can win with your money and reach every retirement dream you have.  And we’re here to help you every step of the way.

Damon Roberts