Why Retirees Must Focus On What They Financially Control

I can’t tell you how many retirees that I talk to that are scared by all the uncertainty in the world. They literally find themselves lying awake at night because they are afraid they are going to run out of money.

It doesn’t have to be that way—it SHOULDN’T be that way. And this First Common Sense Core Principle of Retirement Investing is that you need to focus on what you CAN control and not worry about what you can’t.

I believe people become scared because they feel they are in a situation where they don’t have any control of the outcome. The 24-hour news media has to fight for your attention so they use headlines designed to cause fear. There’s a saying in the media that ‘if it bleeds it leads’ which means they want to start with stories that make someone feel afraid. It’s to THEIR benefit, not yours.

So you watch the evening news and night after night they are talking about the crisis in Europe or our country’s deficit or of the latest dive in the stock market. They show scenes of thousands of people waiting in lines just to get a chance to try and get a job. There are stories of middle-class people now having to resort to food banks to feed their family. 

No wonder people are scared! Fear can be paralyzing.

We are afraid when we sense there is something threatening us and we can’t do anything about it. There’s nothing you and I can do to solve our country’s deficit. There’s nothing we can do to solve the crisis in Europe. We can’t keep the stock market from crashing.

But here is the key. We CAN control what we will do in each of those situations. For instance, we can control how we will adjust our investments to protect us from the threat of the U.S. Dollar declining in value because we have such a large deficit. We CAN control the risk associated with different outcomes in Europe by identifying the possible outcomes, determining the impact each might have on our investments and knowing ahead of time what we should do.

Successful people recognize they can’t control events, but they can control what actions they will take if an event occurs.

Having a plan for each of the various situations that might arise will make you feel more in control and less at the mercy of Fate. Focusing on what you can control will get rid of the paralysis and enable you to regain your confidence. You can do this. You can develop an understanding of the various potential economic threats that exist and determine the best way to overcome each one. All it takes is a little bit of time and effort…and I’ll help you along the way.

So, what are some of the things that you find yourself worrying about? Fear tends to be nebulous and that makes it hard to overcome. Think through what is causing your worry and try to identify the specific ways that the situation or event will affect you. What can you do to help prepare in case that does happen? Are there things you can do to could prevent it from happening or mitigate the effects?

Let’s Look At An Example…

One of the biggest fears most retirees have is running out of money. 

What is causing that worry? Is it that you’ve seen the value of your nest egg take a big hit and you aren’t sure there is enough left to last as long as you need it to? Is it that your expenses keep going up? 

If that’s the case, the first thing you need to do is to get the facts. Instead of just worrying whether or not you will have enough money, do the math so you can find out. There are different free calculators available on the internet that can help you see how money your money will last. 

By the way, you don’t have to do all the work yourself. It’s about getting the information you need, not personally crunching every number. I have a process where I have identified 54 different threat scenarios. I can then use statistical testing to determine the probability of success that someone will have of reaching their goal.

The point is that you find out the facts. Based on the facts, then you can develop different plans of action. Let’s say that testing shows that you will have a better margin of safety if you either reduce your expenses or increase your income.

• What are steps that you can take to reduce your income?
• Where can you cut costs?
• Would selling your home and moving to something smaller help?

Or maybe it would be easier to try to increase your income. Is it possible to get income from doing consulting work or taking a part time job? Is there a way to make money from hobbies that you enjoy?

Get the idea? This is just an example, but can you see how engaging your mind, getting the facts and then brainstorming solutions puts you back in control? We all feel better about a situation when there is something we can do about it. 

So this first Common Sense Core Principal is to focus on what you can control instead of what you can’t.

Real-Life Example From One Of My Clients.

My job as a portfolio manager is to put my clients back in control so they can sleep at night. A few months ago, a wonderful lady in Florida contacted me because she wasn’t completely satisfied with her current advisor. I’ll call her Sue. 

She was tired of worrying about what might happen if there was another big dip in the market. She found herself worrying when the evening news would report on riots in the streets of Greece. She would become afraid when she’d get emails or information in the mail that our country was going to collapse and that she should buy gold.

Instead of just worrying about things she couldn’t control, she decided to focus on what she could. She started doing research and found out that her worry was justified because the way her current advisor was managing her investments, there wasn’t anyone really watching her money from day-to-day. So she knew that if the market dropped several percent so would her account.

That research led her to contact me.

She ended up becoming a client because of the way that I approach managing investments and the well-defined risk management processes I have in place to prevent significant losses. 

That was about 3 months ago. At the time the markets were doing fine.

Then the markets started to drop. This was leading up to and shortly after the 2012 elections and the markets would surge one day and plunge the next. They were a real roller coaster. In the midst of all that uncertainty, a time when the clients of most advisors are calling them because they are afraid, Sue sent me an email and this is what it said:

“Jeff, I just thought you’d like to know that I am no longer squeamish as the markets continue to tumble up and down.  Just knowing you are aware of my risk tolerance and that should the market go to “Hades in a hand basket”  action will be taken to protect my assets from falling below that tolerance.  No more (as you say) buy, hold, and suffer!”

Sue doesn’t lying awake at night anymore because she realizes that there are plans in place regarding how the portfolio will be adjusted based on which of the various threats we may be facing. She feels in control because she knows there is someone that is working with her to plan how we will respond to what lies ahead, prepare for the various possible outcomes and that is ready to quickly execute those plans as needed.

Sue took the time to analyze why she was worried and found out that her worry was justified. She got the facts. Then, armed with the facts, she figured out how the situation could be remedied and she took action. 

If Sue can do it, so can you.

I want you to be successful and to be able to sleep at night. Focusing on what you can control and not worrying about what you can’t is the first Common Sense Core Principles of Retirement Investing.

Sometimes we allow advertising messages to unduly influence the way we think. That can easily happen with all the commercials and information about investing that bombards us. I’ve noticed a subtle shift in investors attitude toward their money…they seem to lose sight of one very basic fact—a fact that needs to guide all of their investment decisions.

The second Common Sense Core Principle of Retirement Investing addresses this shift and brings you back to basics. Keep an eye out on this blog for the next posting.

In the mean time please leave any comments you have below and feel free to share this article on social media.