It’s Not All About Home Runs

Kevin Wray Income Planning, Income Planning, Insight Investing Articles, Investing, Investing & Planning, Retirement

We'd all like to be able to hit home runs, but the truth is that there just aren't that many home run hitters out there, even at the pro levels. That's why a lot of teams prefer to play "small ball".  Small ball is not as exciting as hitting a homer, but it still gets runs on the board by using other elements of the game like bunting, sacrifice flies, steals, walks, etc.

A solid retirement plan should be built in a similar way. Don’t just try to hit home runs with risky investments (where you’ll often end up striking out), especially as you get older. Instead, focus on taking less risk that can still allow you to get the job done.

To determine how much risk you should be taking, we create a Simplicitree® plan.  This will provide you with your unique retirement number. This is a simple to understand plan that you can look at on a yearly basis to see if you are on track to accomplish your retirement goals.

The plan will give you a very specific number based on your current investments, income and retirement goals. This number is the rate of return you need to earn on your savings so that you don’t run out of money during retirement.  We call this your retirement number.

It’s Not All About Appearances

The book “Moneyball”, which was also made into a movie that received 13 Oscar nominations, told the story of Billy Beane and the Oakland A’s method of building a team.

The premise of the Moneyball concept is that you should draft, sign, and develop players based on the evaluation of advanced data and statistics. This was a contrast from baseball’s traditional methods, where scouts paid less attention to numbers and gravitated toward players who “looked the part”.

In your retirement planning, don’t be fooled by fancy brochures and sales materials, or by slick sales people who are simply hocking a specific product.  I had a client years ago that wanted to invest into pay phones because they were assured by a sales person that a 10% per year return would happen.  We all know what happened to pay phones; and it did not involve a positive return.

If you saw the movie or read the book, you probably remember that the movie was all about numbers. The number you should be concerned about is your retirement number.

We encourage you to work with someone who is willing to help you understand your numbers and who places an emphasis on logic and math instead of emotions like fear and greed. Make logical decisions based on your retirement number

Five-tool Players Are Valuable

In baseball, a five-tool player is one who possesses five specific skill sets:

  • Running speed
  • Arm strength
  • Hitting for average
  • Hitting for power
  • Fielding ability

In your retirement plan, you need to make sure your money is accomplishing five very specific things as well:

  • Emergency fund
  • Regular income
  • Long term growth
  • Healthcare/long term care coverage
  • Legacy plan

Our Simplicitree® plan addresses all these items.

Home runs are nice but base hits will add up over time. Knowing your retirement number is critical for making sound financial decisions. If you don’t know your retirement number, please give us a call and we will be happy to meet with you.