Broker Check

Why Retire?

May 22, 2019

I have written about, devoted whole seminars to and discussed privately with clients, friends and family the importance of saving more money. Meanwhile, we have been sold the idea that our return rate is more important than our savings rate. It is not.

Rate of return, over a lifetime of investing, is never a sure thing. The stock market has produced the highest rate of return of any commonly held asset class – before taxes at least – but it also has suffered severe downturns.

If one of those downturns happens to come at the wrong time in our lives, the effects could range from inconvenient or suboptimal to downright catastrophic.

To defend against this danger, we are often advised to keep a significant percentage of our assets in fixed income vehicles, for safety and income. These holdings may tend to make the return on our portfolios less volatile. At the same time, it potentially increases the likelihood that our investments as a whole will not outperform the stock market, over time.

Should we simply throw caution to the wind, roll the dice and hope life events transpire perfectly for us? The answer, of course, is no. That would be like running around in the shower expecting to not get wet. It represents magical thinking.

This brings me to another misguided notion that, in my opinion, has damaged the lives of many individuals- early retirement. This is the pernicious belief that one of our life goals should be to stop doing, as soon as possible, what we have devoted our lives to doing well. Like most bad ideas it has gained traction by carrying within it a kernel of truth.

We should very much be focused on getting to a time in our work lives when we have created some financial security for ourselves but not so that we can stop working. Rather, so that we can arrive at the point at which every day that we work becomes a bonus. Let us call this the “why retire point.”
The “why retire point" by definition, means you are working out of desire instead of need, delight instead of despair and the desire to create, rather than consume.

Anyone can immediately perceive the power of this state of being, but I want to put a finer point on this. As I see it there are two broad groups of advantages to reaching the “why retire point.” They fall into both quantitative and the qualitative categories, money math and the social reality of our lives.

The math is the most obvious, so I will start there. Almost everything we and the people we love want and do costs money. The more of it we have, the less we lack and the more we can do for ourselves and others. Clearly, the longer we work, the more we will earn over our lifetime.

Things like the mortgage, rent, food, heat/air conditioning, water, health insurance, phone, TV, internet, car(s), fuel, day care, grade school, high school, college, graduate school, clothes, shoes, leisure, hobbies, vacations, and on and on, all come at a cost. More money, if approached correctly, can equate to more freedom.

If you do not have any money, or if you have very little, you will have limited access to these and other things. Quantitatively speaking, if we have enough money to afford the things we need and want, then life should be good. But having enough, just enough, also means that there is no margin for error.

Qualitatively speaking, it turns out that just meeting our needs, simply keeping our heads above water, can cause anxiety and stress. We watch the news and see some tragedy or talk to friends and hear about our old classmate who has fallen desperately ill or even passed away. Then we think about ourselves and, although we are making ends meet, we wish we had a cushion.

I read recently that 40% of the country lives paycheck to paycheck and another 38% have done so within the past 12 months. This constant state of financial fear cannot be good for health, improve their relationships, or make living more fun.

I once read an old proverb that says, “Rich or poor, rich is better.” And that is it, really. It does not make you a better person, more able to love or be loved, more decent, compassionate, intelligent, honest or honorable. Wealth, properly utilized, just makes life easier.

My goal is to help you get to the “why retire point.” Once this state of being is attained, you might find you are viewing life differently. What was tedious becomes markedly less so, what was annoying becomes humorous and what would have been infuriating becomes a moment for reflection.

To get to this desirable state of being requires both planning and action. You can do it. If you like, work with a financial services professional that you trust to help.

Scott R. McGimpsey May 22th, 2019

This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy. Neither Summit Brokerage Services Inc. nor Scott McGimpsey is engaged in rendering legal, accounting, or other professionally services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm with securities offered through Summit Brokerage Services Inc., Member FINRA, SIPC