#172 - Building A Strong Foundation For Your Retirement Investments

Hello everyone and welcome once again to the Retirement Answer Man Show, I am your host Roger Whitney and I am the Retirement Answer Man. This show is part 2 in our series on investing. Today we will look at why maintaining a strong investment foundation is so important as you enter retirement and what steps you can take to build it. We’ll walk through three major types of investments, their average returns and how inflation can affect them. It may have more of an impact than you realize. Keep listening to hear the details. Investing during retirement is like riding into the wind When we were younger, working in our career, and contributing regularly to our investments, we enjoyed a bit of flexibility. Flexibility to adapt to market downturns or to our own bad investment decisions because we had a constant flow of money going into our investment plan. However, now that we are nearing retirement, that flexibility is fading and will eventually be gone. We will no longer be working a job that allows us to contribute to our portfolio and we will most likely be drawing on our investments in order to sustain the life we desire in retirement. This loss of flexibility makes it crucial to have a strong investment foundation when you enter retirement so that you can pivot your investments to work for you instead of you working for your investments. Listen to this episode to hear how to build a great foundation. Common asset classes, their returns, and what history reveals There are three main asset classes we think of when we talk about investing. Cash or Cash-like assets, Bonds, and Stocks or equities. More than likely your portfolio is made up of a collection of these three classes. Some are useful in generating income for your retirement and some are not. In today’s episode, I want to dive into each of them and look at the historical returns to get a rough idea of how we can expect each of these asset classes to perform in the future. In addition, I’ll factor in inflation and see where that leaves these common three. Make sure you listen to this episode to get my thoughts on the usefulness of each of these assets. Taking steps towards Retirement Success In last week's show, I challenged you to gather up all of your investment statements into one place so that we could work on them together.. Well, the time has come. Go grab those statements and get ready to analyze them with honesty and discernment so that you can begin taking steps towards building a foundation for a great retirement. Don’t over rationalize happiness! If you are anything like me, there are activities you do that make you happy. For me, it is mountain biking. The feeling of a good workout, the exhilaration of pushing my limits, and the peace of relaxing in nature brings me a lot of happiness. The other day I was planning on going out for a ride, but as the time approached I found myself trying to talk myself out if it. I came up with some pretty good reasons why I shouldn’t go but in the end, I went anyway. When I finished, I realized that the happiness it brought me was worth it and I should try to not over-rationalize it again. Do you have something that brings you joy, that you often talk yourself out of? Don’t! OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN [0:30] The weird science of Investing. [2:56] Building a good investment foundation. HOT TOPIC SEGMENT [4:42] Investing wisely when you are nearing retirement is more important than ever. [5:00] When you need your investments to work for you to generate the life you want, you need a specialist to aid you. [7:00] When you are entering retirement, you have less ability to absorb market fluctuation. [8:45] Without the ability to continue contributing to your investments, it might feel like you are riding against the wind. [11:00] Investment mistakes become a much bigger deal once you reach retirement. One small fumble can have huge impacts on your quality of life. [13:00] IT’s time to get your investments working for you! WHAT’S THAT MEAN SEGMENT [14:00] What is an asset class? [15:52] What are returns? [16:43] What are Capital Market Assumptions? PRACTICAL PLANNING SEGMENT [10:20] Roadmap of the coming weeks. [19:27] The Bruce Lee philosophy. [20:00} Three main asset classes and what history teaches us. [21:00] Cash-like investments. [22:55] Bonds. [26:30] Stocks or equities. [30:25] How does inflation change this? THE HAPPY LAB SEGMENT [34:08] Are things you enjoy doing that you talk yourself out of? You shouldn’t. TODAY’S SMART SPRINT SEGMENT [354:15] Take out your investment accounts that you gathered in the last episode. Look at them while asking the question “Is this weird science or does this investment get me where I need to go?” RESOURCES MENTIONED IN THIS EPISODE Contact Roger: http://www.rogerwhitney.com/retirementanswers/ Roger’s retirement learning center: www.RogerWhitney.com/learn The Retirement Answer Man Facebook page: www.Facebook.com/RetirementAnswerMan