Much has been said about the interest and engagement of Millennials in retirement readiness. So a discussion at a recent TD Ameritrade Advocacy Summit held in Washington, DC certainly appears well-timed. Fiduciary News’ Christopher Carosa provides a look at what a panel of four retirees told attendees about what they wish they had known about being ready for retirement when they were as old as the Millennials are now.
1. Start early, not late. Carosa notes that this is an old standby maxim and that “the mathematics is obvious, but the psychology is not.” He notes that the panelists’ biggest mistake was that they had not started preparing for retirement earlier, and that they were fortunate in that they could make up for that and other decisions that could have hurt their prospects for financial security during retirement.
2. Cut spending and keep your eye on the retirement ball. Calling this notion a corollary to the first tip, Carosa argues that it “fits well within a comprehensive retirement plan.” He notes that employees often receive advice that they should save up to 20% of their salary. This has the obvious beneficial effect of increasing the amount one has on hand for retirement, he points out, but also introduces discipline that will serve future retirees in good stead after they leave the workforce — the importance of which he said the panel confirmed.
3. Invest wisely (i.e. for the long term). It can appear that investing necessarily involves sophisticated formulae and that one should “try to outthink the markets.” But Carosa notes the panelists’ stance that that is not necessary, and that keeping things simple with an eye on the long-term nature of investing for the purpose of building retirement savings can be a beneficial approach. “Slow and steady wins the race,” he says.
4. Pick a stock and stick with it. One of the panelists cited Warren Buffet’s advice: “I’d rather pay a fair price for a great stock than a good price for a fair stock.” Carosa says that this approach is important for those who want to actively manage their portfolios and would rather avoid the risks entailed in investing in index funds. And, Carosa says, such an approach is well-documented to be one that in the long run produces greater yields than one that involves more risk.
5. If you don’t have time, hire a professional. The panelists generally had managed their own retirement funds, Carosa reports. But, he adds, they recognized that not everyone has the time, skill or patience to do so and that they suggested that those who do not should enlist the help of a professional.
6. Keep a lot of cash for when the market goes down. “The interesting thing about this tip,” says Carosa, “is that it was famously recommended by Ben Graham, Warren Buffet’s mentor.” He argues that this strategy is something one may want to confirm with a professional, at least regarding reinvestment, but that extra cash can come in handy for retirees regardless.
7. Don’t panic and stick it out. Remember that there are ups and downs in making and holding investments, as the panelists did. “One’s long-term investment character isn’t determined while the market is rising. It is revealed when the market falls,” Carosa says. He further argues that leaving the market when there is a downturn is “one of the worst decisions long-term investors repeatedly make.” The panelists, Carosa says, “now know no tree grows to the sky, nor does any correction end at zero.”
1. Start early, not late. Carosa notes that this is an old standby maxim and that “the mathematics is obvious, but the psychology is not.” He notes that the panelists’ biggest mistake was that they had not started preparing for retirement earlier, and that they were fortunate in that they could make up for that and other decisions that could have hurt their prospects for financial security during retirement.
2. Cut spending and keep your eye on the retirement ball. Calling this notion a corollary to the first tip, Carosa argues that it “fits well within a comprehensive retirement plan.” He notes that employees often receive advice that they should save up to 20% of their salary. This has the obvious beneficial effect of increasing the amount one has on hand for retirement, he points out, but also introduces discipline that will serve future retirees in good stead after they leave the workforce — the importance of which he said the panel confirmed.
3. Invest wisely (i.e. for the long term). It can appear that investing necessarily involves sophisticated formulae and that one should “try to outthink the markets.” But Carosa notes the panelists’ stance that that is not necessary, and that keeping things simple with an eye on the long-term nature of investing for the purpose of building retirement savings can be a beneficial approach. “Slow and steady wins the race,” he says.
4. Pick a stock and stick with it. One of the panelists cited Warren Buffet’s advice: “I’d rather pay a fair price for a great stock than a good price for a fair stock.” Carosa says that this approach is important for those who want to actively manage their portfolios and would rather avoid the risks entailed in investing in index funds. And, Carosa says, such an approach is well-documented to be one that in the long run produces greater yields than one that involves more risk.
5. If you don’t have time, hire a professional. The panelists generally had managed their own retirement funds, Carosa reports. But, he adds, they recognized that not everyone has the time, skill or patience to do so and that they suggested that those who do not should enlist the help of a professional.
6. Keep a lot of cash for when the market goes down. “The interesting thing about this tip,” says Carosa, “is that it was famously recommended by Ben Graham, Warren Buffet’s mentor.” He argues that this strategy is something one may want to confirm with a professional, at least regarding reinvestment, but that extra cash can come in handy for retirees regardless.
7. Don’t panic and stick it out. Remember that there are ups and downs in making and holding investments, as the panelists did. “One’s long-term investment character isn’t determined while the market is rising. It is revealed when the market falls,” Carosa says. He further argues that leaving the market when there is a downturn is “one of the worst decisions long-term investors repeatedly make.” The panelists, Carosa says, “now know no tree grows to the sky, nor does any correction end at zero.”
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