Chess, Not Checkers

Chess, Not Checkers

Kevin Wray Finance 101, Income Planning, Income Planning, Insight Investing Articles, Investing, Investing & Planning, Retirement, Retirement Planning, Risk Management

How is planning a successful retirement like playing a game of chess? Let’s break down
some of the pieces on the chess board…

1) Pawn

People see pawns as expendable and underestimate their importance. But pawns can be important to the overall strategy in chess; in fact, if a pawn sticks around long enough and makes it to the other side of the board, it becomes a queen.

The pawn is like those monthly contributions to your retirement accounts over the years. Each individual contribution might seem small, and your progress might feel very slow and incremental. However, after many years of steady, disciplined contributions, your pawn will someday become a queen. There are plenty of people who never felt like they were saving much, but now have large nest eggs which need help managing.

2) Knight

Because of the L-shaped path that he makes when he moves, the knight can jump over other pieces that appear to be in his way. No other piece can do that, so this is a significant advantage for the knight. However, there’s also a trade-off with the knight as he can only move short distances at a time, even if the board is wide open. Therefore, the knight doesn’t have the same upside potential as pieces like the queen, rook, and bishop; rather, he specializes in moving around a crowded board.

In retirement planning, the knight is your conservative investments. This money doesn’t have the potential for astounding growth in a particular year, but that’s not its job. Its job is to be predictable and reliable and not run the risk of disappearing.

3) Queen

The queen is the most powerful piece on the board because she can move long distances in any direction. But chess experts will tell you not to get too fixated on your queen, because at the end of the day, she’s just one of your 16 pieces. Sometimes it makes sense to sacrifice your queen in order to give yourself the biggest possible advantage overall. Chess can be just as fun and exciting without a queen on the board.

The queen is your high-risk money in retirement planning. Just as you shouldn’t fall too deeply in love with your queen on the chess board, it’s also important that you don’t get too fixated on the growth potential of your high-risk money. Sometimes people end up taking too much risk with money that they cannot afford to lose.

4) King

In the game of chess, you must protect your king. If you fail to protect your king, the game is over. The king is your retirement income. You must make sure nothing happens to your income, because if you wake up one day and it’s not there…check mate. The game is over.

Retirement income can be generated in several different ways—Social Security, pensions, annuities, rental income, etc. In whichever way your income is being generated, you must have a plan to ensure that you’re getting paid in a predictable, reliable fashion.

If you have any questions, or you would like to discuss your retirement (or chess) strategy, please feel free to reach out to our team and we will be happy to help in any way we can.