Your daily routine, from tying your tie in the morning to loosening it when you get home, is a happily unchanged fixture for much of your life. But major events, such as retirement, shift it. And it isn’t just your day to day activities that change. Your financial routine shifts too! The saving and wealth building strategies in place during your working years fall away in favor of spending and decumulation strategies. The goalposts move and the objective of your new routine changes to spending your funds wisely. This requires a different mindset and a new approach to how you view your money!
Making the Switch to Paying Yourself
Your net worth and income must be viewed differently when you switch modes from saving to spending. Income decouples from effort. Being rewarded for your time, energy, and knowledge largely becomes a thing of the past. And why? Because income is now a product of how you allocate your nest egg. Extra time spent fiddling with your portfolio and trading isn’t correlated to extra income or outperformance. There are already tens of thousands of traders spending 14-16 hours a day at a Bloomberg terminal trying to figure how to do it. Your odds of figuring it out before them are low. Very low.
To a degree, retirement means giving up some control. Markets will return what markets will return and spending 200 hours researching ‘the best’ dividend investments isn’t any more likely to produce a better result than spending two hours to pick a line up of well diversified ETFs and passive index funds. Making the switch to paying yourself means getting comfortable with the fact that your income is a product of your nest egg (i.e what you’ve already built and already saved)!
What Does This Change?
Though this approach to thinking about your net worth and income feels passive, in practice it comes with some serious consequences for the way you spend your money. Throughout your life, you’ve wanted to boost your income in order to cover your expenses, save, and invest in your future. This perspective puts your income as the foundation of your life and your achievements.
However, if you attempt to carry that mindset over to retirement, maximizing your income may lead to excess risk taking, biased decision making, and even unnecessary taxes. All of those are bad, and they culminate in a shortened lifespan of the savings you worked so hard to build!
Retirement is about leisure and reinvesting your energy into the things that excite and motivate you. It isn’t a time to stress over money and worry about whether that ‘paycheck’, so to speak, is ok to cash.
The retirement accounts, dividend investments, rental properties, and other assets that make up your net worth are still part of the routine. They just exist in the background. Shift your focus to what you spend – a direct result of your actions – and leave your income streams alone.
Making the switch from saving to spending is like going from driving a car to flying a plane. It’s a whole new question to ask of your money and there are a lot of new tools, frames of mind, and opportunities to be aware of to successfully navigate your retirement. Rather than learn the whole retirement game on the fly, we can help guide you toward achieving your retirement goals.
REGULATORY DISCLOSURE
Carmichael Hill & Associates, Inc. is a U.S. Securities and Exchange Commission Registered Investment Advisory firm. Registration does not imply that the SEC has endorsed or approved the qualifications of Carmichael Hill or its respective representatives to provide any advisory services. Advisor does not render or offer to render personalized investment advice or financial planning advice through this medium. Advice can only be given after:
- Delivery of a disclosure statement by advisor to client.
- Execution of our Investment Advisory Agreement between the client and the advisor.
- Initial payment of the planning fee or investment advisory fee by the client to the advisor.
- Advisor will not solicit or accept business in any state in which she or he is not properly registered or otherwise qualified to conduct business by virtue of a state “de minimis” exemption.
DISCLAIMERS
The information in this web site is based on data gathered from what the Advisor believes are reliable sources. It is not guaranteed as to accuracy, and does not purport to be complete and is not intended as the primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The identification of specific funds and model portfolios is being made on the assumption that the investor would participate in that investment or portfolio on a long-term basis and only after consulting with their investment advisor to determine their needs and tolerance for risk. With respect to any such identification, there can be no assurance that the fund or model portfolio will in fact perform in the manner suggested.
The results do not represent actual trading due to the timing of the clients’ trades and their trading costs. They may also not reflect the impact that material economic and market factors might have had on the advisor’s decision making if the advisor were managing the clients’ money. Investment and portfolio results may be different than the results the advisor’s discretionary clients achieve due to the timing of trades and the market conditions.
All references that might be made to an investment or portfolio’s performance are based on historical data and one should not assume that this performance will continue in the future.
LINKS DISCLAIMER
At certain places on this Carmichael Hill & Associates, Inc. Internet site, live ‘‘links’ to other Internet addresses can be accessed. Such external Internet addresses contain information created, published, maintained, or otherwise posted by institutions or organizations independent of Carmichael Hill & Associates, Inc. CHA does not certify, endorse or control these external Internet addresses and does not guarantee or assume responsibility for the accuracy completeness, efficacy, timeliness, or correct sequencing of information located at such addresses. Use of any information obtained from such addresses is voluntary.
