Road to Retirement

Foreword: Why I’m So Passionate About Your Transition to Retirement

I began my career as a financial advisor at an extraordinary time, riding the coattails of the “Goldilocks Economy” of the 1990s. This was a protracted period of low inflation, low unemployment, relatively small federal debt, government surpluses and financial deregulation. As the stock market continued to hit and surpass record highs, new investors were flocking to the markets in droves to participate. 

As a new advisor, this environment made my job relatively easy. There was plenty to talk to clients about, from the recently introduced Roth IRA, to upgrading life insurance contracts on the heels of industry-wide reinsurance adjustments, the increasingly outlandish returns investors were seeing throughout the tech stock boom, and the lifestyle upgrades this newfound wealth would provide. New clients couldn’t get in the door fast enough, seeking to participate in what they viewed as a modern-day gold rush.

As investors watched their portfolio values balloon, it became increasingly common for empty nesters to proclaim they wanted to retire early. More often than not, this occurred without any thought to the ‘irrational exuberance’ that the current Chair of the Federal Reserve, Alan Greenspan, continued to warn about. This was the case with one of my earliest clients. Little did I know at the time, it would become one of the most valuable lessons of my career.

I had only worked with this couple for a short period of time when they asked if they could stop by my office to talk about an important change in plans. They explained that they had just returned from a vacation in Florida where they had purchased a beachfront condo on a whim. I assumed they were looking for advice on whether or not they could afford the condo and how this purchase might impact their planning going forward. I was wrong. They had a much bigger bombshell to drop: They were retiring at the relatively early age of 58 and had decided to quit their jobs immediately.

I recall sitting across the table from them in what can only be described as stunned silence. While I knew their grown kids were out of the house, early retirement had never come up as a goal or something they were considering in any of our prior discussions. After regaining my composure, I spent the balance of our meeting begging them to hold off on their decision to quit their jobs and allow me to first run some calculations to make sure they would have the income they needed for the next 30+ years. I also urged them to consider rebalancing their portfolio to help reduce downside market risk, since their current portfolio was heavily weighted in equities, with a substantial tech stock component. Unfortunately, they had already made up their minds. They were not only confident in their decision to retire early, but reluctant to make any prudent changes to their portfolios as they began drawing down on their assets to supplement their new chosen lifestyle.

Initially, their new life in retirement was everything they wanted. They enjoyed summers at the family cottage in Wisconsin, welcomed their first grandchild and spent winters in sunny Florida. For about two years, everything was great—until the dot-com bubble burst. As tech stock values fell through the floor, their portfolio took a significant hit. Then, they made the biggest mistake of all. Against all common sense and my strong objections, they allowed their emotions to rule the day and sold off their entire portfolio, effectively locking in deep paper losses.

Since both were still too young to begin receiving Social Security or pension distributions, they had no alternate sources of regular income to tide them over and pay for their daily living expenses as the markets recovered. And since they no longer participated in the stock market, they could not benefit from its recovery. In the end, they decided to sell the condo in Florida at a loss and return to work. Needless to say, they never fully recovered from these disastrous financial decisions.

While this was a painful lesson for my clients, it was also painful for me and something that remains top-of-mind to this day. While the couple never blamed me or expressed any anger toward me, I could sense that they felt ashamed about their past refusal to heed professional advice. Eventually, their visits to my office became less frequent. When they did stop by, they spent most of the time trying to rationalize their past decisions. After a few years, they quietly moved their accounts away.

As financial advisor, it’s devastating to experience a situation like this. I went into this business to help people build and protect their wealth and their legacies as well as assure future lifestyles.  Instead, I was left feeling the way I imagine many doctors must feel when patients refuse to take their advice and suffer serious health consequences as a result. In my case, it’s my clients’ financial health that is at stake.

Yet, for me, this experience also inspired a renewed sense of purpose and resolve. Witnessing the real-life consequences of poor financial decision making—especially when people are at an age where they have less time to recover—led me down a path to help make sure this doesn’t happen to any client again. It’s why I have spent more than two decades focused on ensuring clients have access to the latest sophisticated tools and resources, experience, thoughtful guidance, and relevant advice required to navigate their road to retirement with confidence.  

In the weeks and months ahead, I will be publishing a series of articles specifically for those who are in the later stages of their career and need to focus on preparing for that next stage of life, providing insights and tips for a successful transition to retirement. I hope you will check back often as I address a broad range of topics, including savvy Social Security claiming strategies, choosing the right time to retire, making your workplace benefits work harder for you, budgeting for healthcare expenses in retirement, and much more. In the meantime, if you have questions or would like to schedule time to talk about your needs, please don’t hesitate to contact us at your convenience.  Together we can build a successful Road to Retirement.

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Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. 

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