The financial planning process can often be confusing and I always look for ways to draw analogies to help explain certain concepts. One of my favorites is referring to the retirement planning process as baking a pie.
First you need to decide what kind of pie you want. Apple? Cherry? (Peach, of course, in Georgia) In the same way, you need to decide what you want your retirement to look like. Travel or not? One round of golf a week, or five? How bad do you want to spoil your grandchildren?
The best way to choose your pie (and financial goals) is to work with your favorite financial chef, Tom Stark. We work together to find the right recipe taking into account your personal preferences and tastes. I also check for allergies since I know many people are allergic to market fluctuations to some degree.
Just like a recipe will have ingredients such as a cup of this and a teaspoon of that, I also look over your investment portfolio and try to get things into the correct proportions. Sometimes having 12% Large Cap Core Stocks and 7% U.S. Treasuries may not seem like a big deal. But if you have ever tasted a pie with too much or not enough sugar, you know how important it really is.
Now for the baking stage. In this analogy the heat is your risk tolerance. Baking at 400 degrees for 60 minutes is not just a suggestion. Too often we think that by turning up the heat, taking more risk, we can get the pie finished quicker and retire earlier. Often you will just burn the pie. And after the recent stock market swings a lot of people are instead turning their oven down to 200 degrees. At that temperature the pie will never get done in time and you’ll end up with a mushy mess at retirement. This is one reason we recently started using Riskalyze to help determine your acceptable “heat level.”
When it is time to eat your pie, we must be careful to eat in moderation and not take too large of a piece all at once. Close attention needs paid to the timing and amounts of your withdrawals. After all, this pie has to last the rest of your life! Some people even like to use investments that will guarantee a helping of your pie every year for the rest of your life.
Call me if want to discuss your “recipe” or any other financial issues.