Much like Jill has trained me to unload the dishwasher every morning, I have trained my very favorite, first wife to expect concrete answers to the following questions. When we discuss our financial future, this is what we talk about.

Can you answer these questions about your financial future?

How much income we need and expect:

Do you have a retirement income projection showing the total amount of income you can expect to receive every year throughout your entire retirement, broken down into each individual income source? Does your retirement income analysis show when each income source starts, stops, increases, and decreases?

How much tax we will pay:

Do you have an income tax analysis showing how much income tax you will pay as you take income from your assets? You may believe that taxes are going higher in the future; have you accounted for that?

How much money we will likely leave behind:

Do you know how much money you can reasonably expect to leave to your beneficiaries after you’ve used your assets for income for your entire life?

What steps we will take to make our plans work out:

Do you have a written summary of your entire plan that includes the status of your current financial position, what you’re trying to achieve, and the step-by-step process of what’s required for success?

How much market exposure we want / have?

Do you have an understanding of how much market exposure you have and what would happen if the market lost a ton of value?

  • Darryl Rosen

I didn’t go to this race for the thrill of victory. I simply wanted to run a local race with some friends. So, one Sunday morning, I toed the line at the ultra-prestigious Deerfield Dash 10K and 5K. It was a recreational crowd. Lots of people running with their children and dogs, a guy wearing a velvet sweatsuit in the middle of summer, and some runners carrying steaming cups of latte.

There weren’t too many serious runners. (By the way, I didn't see anybody smoking a cigarette on the start line. I've seen that before which, I have to say, caught me off guard!)

Anyway, the race started and, after a few hundred yards, I realized that I was in first place - a position completely new to me. I came in second place once – and yes, there were more than two runners. Anyway, there I was, right behind the police car.

Could this be the day? Could I be destined for Deerfield Dash greatness? Was I going to be forever immortalized in the Winner’s Circle – making me someone the locals would talk about for years to come? Would I be on the cover of the Deerfield Review? Would my finisher’s photo be tweeted and retweeted? Would I have something to post on my Facebook page besides what I ate for breakfast? (The “likes” would be off the charts!)

Ok, ok. I’ll get on with the story. The police car continued with the 10K route, while I followed the 5K route - all by myself. There were no other runners in sight, and, you guessed it - that’s when the trouble started.

I reached the proverbial fork in the road: A four-way intersection with no signs. And yes, I went the wrong way. Instead of going straight, I turned. I don’t think even the scarecrow from The Wizard of Oz could have saved me that day.

Needless to say, a map would have helped me know where to go. (At least I got a free T-shirt...)

So do you have a course map (a plan) for the busy race known as your financial future? Or, are you running ragged without a clue of how to get to your retirement goals?

If you have a plan, review it regularly. We don’t live in a static world. Things change. One year, you may need to put a new roof on the house. The next year, the market might suffer a mighty correction, which may affect how you meet your spending needs.

And just when you think you have it all figured out, something like the COVID 19 strikes, changing everything.

The point is that your lifetime financial map will be loaded with course corrections. Every year, spend time accessing what has transpired, what it means, and what needs to be changed in your plan so you don’t take a wrong turn.

Each year, decisions should be made in an effort to extend the longevity of your assets based on what’s happening in the markets or in your personal life.

I hope you experience the opposite of my day at the “Deerfield Dash.” I went from euphoria to embarrassment in the blink of a wrong turn.

After a few minutes, I realized something was a tad amiss. My watch suggested I had run more than 3.1 miles, which is not a good thing if you haven’t finished a race that equals 3.1 miles and you can't see the finish line!

I was finally able to re-join the correct course in time to come in 3rd place. Yes, I know this begs the question. You went off course but still came in third place? The competition was terrible. I didn't say it was the World Championships!

The guy who came in 2nd place was a man pushing a twin baby jogger! Ouch! You’d think the diaper bag would have slowed him down . . .

Anyway, I wish I had looked at the course map because glory might have been mine. And it can be yours as well during your retirement years, as long as you stay on course!

  • Darryl Rosen

Saw this little guy on my driveway.

Besides an unfortunate reminder of how fast I'm running these days, this turtle should be a constant reminder of how money grows most efficiently.

Most retirement calculators like the ones you might find on the Internet assume a linear rate of return. That is - if you enter 5% growth, the analysis will factor in a linear 5% return.

How can I say this diplomatically. That's sort of a scam.

Money DOES NOT grow that way. Assuming linear growth might make the results look good, but if you rely on this level of investment growth to determine your spending in retirement, it may come back to bite you.

Scenario one: we are assuming a constant 5% rate of return and a nice bit of compounding. (NOTE: This only works if you are getting the same return year after year!)

In the end we have 28% growth. The average annual rate of return is 5%, but because of compounding, we got that extra bump. This is like the turtle. Slow and steady.

What if the returns are more volatile?

In Scenario 2 - we lose almost 5% in the first year, as compared to scenario 1 - a 5% increase. This would leave you with nearly 100K less after one year and, unfortunately, you would be one year closer to retirement. Not good!

In Scenario 3, there is one bad year followed by a few muddling years - then a good one! (20%). Because of the big loss in year one - after 5 years your retirement funds have only increased by 9% overall. You had some compound returns, but you started at a lower base because the first year returns were so bad.

Here's the point:

Do not assume a linear rate of return like most retirement calculators use. Lower yearly returns (with a chance at COMPOUNDING) is a more favorable scenario. Certainly, when compared to years of up and down (volatile) returns. As you get closer to retirement, this concept is even more magnified.

Compounding is a well mis-understood topic. It only works when you avoid large losses. This is why when choosing between the tortoise (in this case the turtle) and the hare, always choose the turtle.


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