By Gary Parsons
I presume we are all familiar with the expression that “it is a marathon not a sprint.” With applicability across a broad swath of topics, it should come as no surprise that retirement planning doesn’t escape its purview. For most individuals, retirement planning, if done correctly, involves decades of purposeful planning. High returns for successive weeks, months or even years, while always welcomed, do not constitute long-term success.
Not to mix metaphors, but I personally enjoy competing in triathlons and swimming in general. I equate the approach to retirement planning to my approach to the swimming portion. Finishing within a targeted amount of time is the goal; however, I have to be cognizant of how I get there. Swimming very quickly and blindly without any regard for direction will get me somewhere fast, but that somewhere may be in the wrong direction. I then have to frantically swim back and the process goes on like that until I finally reach to finish line, or don’t…
I found that the best approach is to take three strokes and get my bearings. Take the fourth stroke to look up at where I am in relation to where I came from and where I am going. Retirement planning is no different. Every once in a while, regardless of how well you may feel like you are doing, it is important to reassess your situation.
This disciplined approach to retirement planning is the only way to ensure that you will remain on target, and not stray into the wrong direction. A few years in a bull market may have you feeling great but potentially poorly positioned for what lies ahead. A few years in a bear market may have you discouraged and poorly positioned to capitalize on the impending successes.
Then there are changes in your life including beneficiaries, employment status and goals that are subject to change. Changes to any and all of those can have substantial impacts on not only the end goal but how you may get there.
To address these changes, both the good and the bad, it is essential to revisit your retirement plan annually. Sit down with your financial professional and go through your situation, if for nothing else but to verify that everything is on course.
One of the most important facets of the plan is benchmarking. To know where you are going you have to know where you have come from. Longevity in your financial planning relationship can help ensure that you never lose sight of where it all started. Good and bad are relative. Understanding how well you are doing relative to your starting position or your last course correction is vital.
Good plans are like a map, or technically a chart if we’re still following my nautical theme. They have an end goal in mind and a strategic way to get there. You need the flexibility to get back on course in the event that you detour and the ability to assess how far you have come along the way. Don’t leave your retirement plan on autopilot while you frantically swim in the wrong direction.
This article is meant to be general in nature and is not intended, and should not be construed as personal financial advice. Investing involves risk and the potential to lose principal. Please consult your financial advisor prior to making financial decisions. Gary Parsons is a Financial Advisor with Waddell & Reed and can be reached at 850.894.9950. Waddell & Reed, Inc., Member SIPC (04/16)
