Fresh Tracks--The Myth of Enough Money
While we enjoy incredibly warm weather down here in Denver, the mountains are measuring the fresh white powder in feet...but the news says stay home. Don't go up there. The journey is scary and the dangers are great:
As many of you know, we are the parents of competitive freestyle skiers and, as you may have heard, skiing is (occasionally) dangerous. We ended 2016 with an injury to one of our skiing kids that required two MRIs, and we enter 2017 with a request from our doctor for a third. Over the past few weeks, the cost of each exam doubled. Yikes!
I mention this not to scare you away from skiing--I'm sure there is enough snow for all of us--but because it relates to a client conversation I recently had. It went something like this, "I have enough money." They have a pension from a huge company. They have Social Security. They have retirement savings. They have next to nothing in debt and a sustainable lifestyle. They have, they say, no desire to ruin their kids with an inheritance. So, they say, "I just don't want to lose my principal."
This is a common perspective but, unfortunately, it can be dangerous.
It's as if this happy couple went skiing into retirement in the fresh powder, enjoying the blue-bird sunny day, without a care in the world, until whamo! I trip-up their skiing like a rock. I ask two simple questions, carefully, and with hesitation, warning, and empathy:
First, do you know that over your lifetime, inflation will increase the cost of living by two-and-one-half times? If this money is to last you for your lifetime, and you do not need it to provide the income right now, then when you choose not to invest in assets that grow at higher rates of return over long periods of time, we choose to go broke, slowly.
I understand you don't want to spoil your kids or grandchildren. It makes sense; I have witnessed the damage an abundance of financial wealth and a dearth of wisdom will do. But is there any person, cause, or organization that you want to endow at the end of your life?
We may never really be certain that we have enough money. It is not a zero-sum game. Instead, money invested in alignment with our goals, values, and relationships is like an abundance of fresh snow--it just gets better and better. We can make fresh tracks for the duration of our lives, and leave a legacy for others, if we have the courage to withstand the inevitable transitory declines of the stock market, and invest for the long haul.
But I assure you that the news will continue to scare you. I am certain it will sound the alarm bells of the next catastrophic decline. It will sound something like, "Don't, whatever you do, go skiing in that fresh snow." Be brave. Be honest. Talk with your wealth manager.