What does retirement planning have in common with growing a garden?
Suppose you decide that you want to plant a vegetable garden because you want to
enjoy your own home-grown vegetables next week. Obviously, it would be ridiculous to
expect you can turn seeds into food that quickly. You would need to prepare the soil,
plant the seeds, fertilize and water the seedling, coddle the plant until harvest – all of
which take time and patience. Gardening is not a process that happens overnight.
Concerning retirement planning, some people struggle with this concept of patience.
Too many people feel like they’re behind in their savings as they approach retirement,
so they end up taking too much risk in an attempt to make up for lost time.
Instead, you should think of retirement planning as being like your garden. Eventually
your seeds will produce plants, which in turn will produce vegetables. The same thing
happens with your retirement savings. You plant the seed and harvest the crop. The
seed is your deposits into whatever investment you and your financial professional have
chosen. It could be a 401k, a 403b, an annuity or other investments. Then the trick is
converting your crop (investments) into a never-ending supply of income.
Like the garden, this doesn’t happen over-night; it takes time.
Rabbits, squirrels, deer and insects will all help themselves to your growing vegetables.
And if you don’t keep the weeds pulled, they will ruthlessly take over your garden and
choke out your plants.
Your retirement savings are also under attack by the weeds and pests of the financial
Hidden fees are the weeds that can choke out your investments and stunt their growth.
Product salesmen who sell you something, make a commission and then never call you
again (unless they want to sell you something else) are the pests that sneak in and fill
up on your “garden”, then disappear into the forest. You must stay vigilant for weeds
and pests so they cannot take over.
Being vigilant means getting involved in your retirement planning, asking questions and
getting more education so that you are better prepared to retire. You need a plan that
makes sense to you and that you understand. If you have a plan to help keep you on
track, you will be in a much better position for retirement, even if/when the market
Keeping the weeds and pests at bay requires planning, and planning will help you make
smart financial decisions.
Your neighbors would laugh at you if they caught you trying to use a water hose to dig
a hole, or if they found you watering your plants by scooping tiny amounts of water out
of a bucket with a shovel and dumping the water on the plants.
But in the financial world, people sometimes use financial tools for equally ridiculous
CDs and money market accounts aren’t the solution for long term investing.
Life insurance is good when used as life insurance, but often gets oversold as an
investment. Stock index funds are good for long term growth, but not for generating
retirement income. Dividends and annuities can generate income, but which one will
work better for you? There are many tools available for all the different life stages you
will go through. You will need a different tool or strategy at age 25 than you will at age
55. The tools may need to change as you get older to fit your needs.
Make sure you’re using the right tool for the right job.
As always if you have any questions please give us a call. We are happy to sit down
with you and review your current plan and your future plans!