Last fall many of us probably remember following the Seattle Seahawks play intense matchups on their way toward the coveted Super Bowl title. Maybe the most riveting of these was against the San Francisco 49ers. I remember I was at a friends house enjoying the game. In the last 30 seconds of the game, I scanned the room. The air was thick with excitement and anticipation, some of the men were sitting on the edge of their seats with their eyes so fixed on the TV screen that you might think they could control the players movements with their eye. Women were nervously speaking under their breath; we couldn’t make it out but some people claim it was prayer.
My friend Brandon sat on the edge of his chair with his hand buried in a Costco size bag of skittles, and I was nervously splitting pistachios to the point where my fingers were on the verge of bleeding. The Seahawks had a 6 point lead and San Francisco was steadily marching down the field. San Francisco was approaching the Seahawks end zone, and it was 1st and 10 at the 20 yard line when San Francisco’s quarterback Colin Kaepernick saw Michael Crabtree in the corner of the end zone. Kaepernick fires a perfect pass to Crabtree. And what seemed like out of nowhere Richard Sherman flies through the air like a super human and blocks Crabtree from making the catch knocking the ball right into the waiting hands of his teammate Malcolm Smith. And so sealed the win for the Seahawks. The house exploded in cheers, and I saw guys dancing in ways that should never be seen in public. Rumor has it that a contractor had to be called out the next day to repair the roof of a house that was shaken off its joists. Hollywood could not have scripted a better ending. What an amazing play, an amazing season and an awesome win.
As I reflect back on the Seahawks season I am reminded just how important a good defense is for your retirement plan. When you transition from a career and earning money to retirement and living on your savings, you have to realize what you have is what you have. You are no longer accumulating assets. Unless you want to go back to work 10 or 15 years into your retirement, you need to have a good defensive strategy to protect your nest egg. Once you retire you may be more interested in defending what you have than trying to score the next touchdown.
So what is it that you are defending against?
How about a major health care event? One that does not kill you, but requires you to need some assistance for an extended period of time.
How about inflation? The federal reserve with their quantitative easing and loose money policy want inflation. They want your money to lose purchasing power over time.
How about stock market volatility? The stock market right now has been running very hot for several years. Does the market go up forever without a correction? How will a significant correction impact your retirement plans? Marginal income tax rates are at an all-time low yet our national debt is at an all-time high. Is it possible for our Country to maintain these low income tax rates when we have ten thousand baby boomers retiring every day and putting more and more of a strain on medicare and social security?
How about a rising interest rate environment? In the past retirees could buy bonds and live off the income. Today interest rates are near 0% and in a rising interest rate environment the bonds you purchase today will be worth less money if you have to sell them before maturity. Understanding the problems you will face can help you craft a defensive strategy to address these concerns.
What’s the purpose of your money? Oftentimes when I ask prospective retirees that question their purpose is usually to help supplement their retirement income, travel and cover unforeseen emergencies. Rarely do I meet a retiree whose plan is to take large withdrawals in the form of a lump sum. If the purpose is for income wouldn’t it make sense to create a plan that helps you achieve your income goals with the greatest certainty and the least volatility?
When you understand the purpose of your money, you can craft a plan that will help you achieve your goals with confidence. When you know the risks you can create a defense for retirement to address those risks.
Imagine the Seahawks marching out on to the field with no purpose, no game plan, no coach and no defense. It would be insane. The same is true for your retirement plan. You need to understand your purpose, hire a coach who can help you win, develop a plan, and craft a good defensive strategy for the risks you will face if you are going to win the game of retirement.
If you really want a sound retirement, then figure out how to adopt Richard Sherman and then hire Marshawn Lynch as your personal body guard. ;)
This article was also featured in the September 2014 Kitsap Peninsula Business Journal.