Up and Down the Mountain

Up and Down the Mountain

July 27, 2023

When you think about your financial life, think of it like a journey up and down a mountain.  On the way up the mountain we are in pre-retirement.  We are engaging the accumulation phase of life.  We may raise a family, build a career, purchase a home, send kids to college and along the way hopefully save enough for our Golden Years. 

As we near the top of the mountain we begin a transition to retirement.  We ultimately enter a new phase; the distribution phase of life.  In this transition, we encounter a whole new environment of decisions and choices.  Choices like pension, Social Security and Medicare elections, the challenge of converting assets to income and asset transfer topics like wills and trusts.  Even more daunting is the thought of experiencing a long term care event.  

Pre-retirees don’t realize that most of the risks, tools and strategies that governed the previous accumulation phase change when we start down the mountain.  Many instinctively recognize this, but due to a lack of education can become paralyzed and unsure what to do.  Just like hiking a mountain, different terrain requires different skills and equipment.  The decent can present new dangers and threats.  If we are not careful we can make serious mistakes and even get hurt because we are unfamiliar with this new environment.  

Sharpening our vision, focusing on preparation and being willing to learn can aid us in our pre-retirement journey.  Consider the following: 

  • On the way up we save and add to our nest egg. On the way down we withdraw funds for living expenses and other needs.  How do we know we won’t run out?
  • As for our investments, on the way up we think of the rate of return.  On the way down we experience a distribution, withdrawal or spending rate. Do we know the difference? 
  • On the way up the mountain when we experience market declines, we learned to be patient realizing assets typically recover over time. But, in retirement our time frame shortens. Knowing we have less time for assets to recover, our feelings regarding market volatility can change.  What does this mean for my investments? 
  • On the way up we don’t spend a lot of time thinking about the family trauma caused by an extended long-term illness, but on the way down this could be real for us.  What is the best way to protect ourselves financially from a long term care event or having cognitive failure? 
  • On the way up the mountain the timing of our Social Security election is a fleeting thought, but in our late 50’s or early 60’s, it becomes a pressing question.  When is the right time to elect?  And what about pension elections and their pesky survivorship options? 
  • On the way up we don’t think too deeply regarding what happens when a spouse passes, but as we age we begin to think of these realities.  What should we do now to prepare? 
  • On the way up the mountain few consider how assets transfer at passing, but on the way down it is the number one question for most seniors. 

We may instinctively recognize that our financial lives will change as we enter retirement, but many do not have the vision, mindset or proper perspective to make proper adjustments.  This is why planning is so important. 

Having a guide through this process is valuable.  Consider working with a financial professional who specializes in this major life transition.  At McKell Partners, this is our area of expertise.  We are available to assist both individuals, families and business owners so they can feel financial peace.  We would love to help you on this journey.