Every January, each of these magazines ranks the highest returning funds in various asset categories over the prior year.

Champagne pours at the companies at the top of the list because they know what’s next.

What’s next is a drastic increase in the amount of money that will now pour into their respective fund.

Why?

Because thousands of people will see their company’s fund featured at the top of the one year performance list in Money magazine.

They’ll take a look at the 2011 investment returns for that fund, compare that return to their own personal investments, and begin to fantasize about what it would have been like if they had ALL their money in that fund last year.

The overwhelming majority of them will then conclude that they need to have their money in that fund too so they don’t “miss the boat” in 2012.

Sound at all familiar?

This is one of the main reasons why the overwhelming majority of investors continue to have horrible investment experiences and remain financially DEPENDENT during their retirement years.

Dalbar Study

Dalbar, a Boston research firm, conducts an annual study of average returns. Their most recent study spans the 20 year period from 1991 through 2010.

Here’s what their most current study reveals:

• The average annual return of the S&P 500 Stock Market Index from 1991 – 2010 was 9.14% (including dividends reinvested)
• However, the average annual return of the “average” equity mutual fund investor (not investment, but an investor, i.e. a person) over the same 20 year period was 3.83%

Take a moment to stop and re-read those two numbers for a moment and let them sink in.

What these numbers tell us is that, while the S&P 500 Market Index delivered a strong average annual return over those 20 years of 9.14%, the average stock mutual fund investor (a person, not an investment) only achieved 3.83%!

That means that the average equity investor’s return was 58.1% less than the broad market index each and every year!

Assuming for a moment that you had $500,000 back in 1991, it’s the difference between you ending up with $2,875,074 vs. $1,060,296! A difference of $1,814,778!

How can that be?

Well, I’ve just given you one big example: rushing to last year’s winner believing that whatever just “did” well will continue to “do” well in the future.

Dangerous!

If you’ve been reading all of my recent Strategies of the Week and you’ve been digesting The Relaxing Retirement Formula™, you know just how dangerous this behavior is at this critical stage in your life.

I’m going to assume for a moment that you’ve been reading right along and you’re in agreement with me on this. And, that you’ve followed the formula to arrive at the investment rate of return that you now “need” to earn in your retirement years (as opposed to the rate of return you “want” to earn).

Now that you’re here, the next question is where do you position your investments to produce that long term rate of return that you need while experiencing less volatility and paying less taxes to the government?

To help you determine the correct answer for yourself, there are four principles and guidelines I’d recommend for you.

Today, I’d like to begin with Principle and Guideline #1:

How Much and When?

Investing properly in your retirement years begins with first knowing what NOT to invest.

This may sound rather odd, but think about it.

Because you will be withdrawing money from your Retirement Bucket™ each month or year, you can’t afford to have those funds subject to any market volatility.

Why take the risk when you don’t have the time to recover?

Investing is about exposing your money to capital markets with the goal of ending up with more than you exposed so you you maintain your purchasing power.

However, in order to do that, it’s quite possible that capital markets may not respond the way you want in the short run and prices may temporarily fall.

If they fall right before you need to withdraw funds to live on, you’ve just suffered investing sin: you’ve sold low!

Or, stated more accurately: you’ve put yourself in a position where you were forced to “sell low”.

So, as I’ve stated emphatically over the last few weeks, the first principle I recommend is getting crystal clear on the amount of money you need to withdraw from your investments and “when” you’re going to need to withdraw it.

Those funds will then be strategically positioned in interest bearing instruments completely free of stock or bond market volatility.

Psychologically, this is difficult for some people to do who have never been in a position of “living” on the money they’ve accumulated.

They feel as though they need to squeeze out every ounce of return they can on every dollar they have.

That’s admirable for some, but extremely dangerous in your retirement years.

As difficult as it may seem at first, it’s critical that you get comfortable with the fact that not every dollar you own will be invested earning “market” rates of return.

Instead, you’re going to have different pockets of money that all have different goals, and thus different investment vehicles in order to support them.

You’re not going to ask every investment to get on the high speed express train.

Next week, let’s move on to Principle and Guideline #2 which is critical to your success.

Committed To Your Relaxing Retirement,

Jack Phelps, ChFC

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to info@TheRetirementCoach.com. Or they can subscribe at our website!

Thank you!

If you pick up a copy of the January issue of Money magazine, or Kiplinger’s, or even Fortune, you’ll see all the winners in the mutual fund game in 2011.

Every January, each of these magazines ranks the highest returning funds in various asset categories over the prior year.

Champagne pours at the companies at the top of the list because they know what’s next.

What’s next is a drastic increase in the amount of money that will now pour into their respective fund.

Why?

Because thousands of people will see their company’s fund featured at the top of the one year performance list in Money magazine.

They’ll take a look at the 2011 investment returns for that fund, compare that return to their own personal investments, and begin to fantasize about what it would have been like if they had ALL their money in that fund last year.

The overwhelming majority of them will then conclude that they need to have their money in that fund too so they don’t “miss the boat” in 2012.

Sound at all familiar?

This is one of the main reasons why the overwhelming majority of investors continue to have horrible investment experiences and remain financially DEPENDENT during their retirement years.

Dalbar Study

Dalbar, a Boston research firm, conducts an annual study of average returns.  Their most recent study spans the 20 year period from 1991 through 2010.

Here’s what their most current study reveals:

• The average annual return of the S&P 500 Stock Market Index from 1991 – 2010 was 9.14% (including dividends reinvested)
• However, the average annual return of the “average” equity mutual fund investor (not investment, but an investor, i.e. a person) over the same 20 year period was 3.83%

Take a moment to stop and re-read those two numbers for a moment and let them sink in.

What these numbers tell us is that, while the S&P 500 Market Index delivered a strong average annual return over those 20 years of 9.14%, the average stock mutual fund investor (a person, not an investment) only achieved 3.83%!

That means that the average equity investor’s return was 58.1% less than the broad market index each and every year!

Assuming for a moment that you had $500,000 back in 1991, it’s the difference between you ending up with $2,875,074 vs. $1,060,296!  A difference of $1,814,778!

How can that be?

Well, I’ve just given you one big example: rushing to last year’s winner believing that whatever just “did” well will continue to “do” well in the future.

Dangerous!

If you’ve been reading all of my recent Strategies of the Week and you’ve been digesting The Relaxing Retirement Formula™, you know just how dangerous this behavior is at this critical stage in your life.

I’m going to assume for a moment that you’ve been reading right along and you’re in agreement with me on this.  And, that you’ve followed the formula to arrive at the investment rate of return that you now “need” to earn in your retirement years (as opposed to the rate of return you “want” to earn).

Now that you’re here, the next question is where do you position your investments to produce that long term rate of return that you need while experiencing less volatility and paying less taxes to the government?

To help you determine the correct answer for yourself, there are four principles and guidelines I’d recommend for you.

Today, I’d like to begin with Principle and Guideline #1:

How Much and When?

Investing properly in your retirement years begins with first knowing what NOT to invest.

This may sound rather odd, but think about it.

Because you will be withdrawing money from your Retirement Bucket™ each month or year, you can’t afford to have those funds subject to any market volatility.

Why take the risk when you don’t have the time to recover?

Investing is about exposing your money to capital markets with the goal of ending up with more than you exposed so you you maintain your purchasing power.

However, in order to do that, it’s quite possible that capital markets may not respond the way you want in the short run and prices may temporarily fall.

If they fall right before you need to withdraw funds to live on, you’ve just suffered investing sin: you’ve sold low!

Or, stated more accurately: you’ve put yourself in a position where you were forced to “sell low”.

So, as I’ve stated emphatically over the last few weeks, the first principle I recommend is getting crystal clear on the amount of money you need to withdraw from your investments and “when” you’re going to need to withdraw it.

Those funds will then be strategically positioned in interest bearing instruments completely free of stock or bond market volatility.

Psychologically, this is difficult for some people to do who have never been in a position of “living” on the money they’ve accumulated.

They feel as though they need to squeeze out every ounce of return they can on every dollar they have.

That’s admirable for some, but extremely dangerous in your retirement years.

As difficult as it may seem at first, it’s critical that you get comfortable with the fact that not every dollar you own will be invested earning “market” rates of return.

Instead, you’re going to have different pockets of money that all have different goals, and thus different investment vehicles in order to support them.

You’re not going to ask every investment to get on the high speed express train.

Next week, let’s move on to Principle and Guideline #2 which is critical to your success.

Committed To Your Relaxing Retirement,

Jack Phelps, ChFC

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to info@TheRetirementCoach.com. Or they can subscribe at our website!

Thank you!

When we use the medical analogy, it seems ridiculous. Yet, this is what the overwhelming majority of retirees do.

They blindly read a magazine, watch a television show, or meet with an investment salesperson and froth at the mouth over the latest new “Can’t Miss / Hot” investment.

Don’t get lazy and fall into the trap. Do whatever is necessary to discover the investment rate of return you MUST earn first.

How Do You Determine Your “Rate”?

The investment rate of return you must earn is dependent on three factors:

1. Your Level of Retirement Bucket™ Dependence: how much money you need to withdraw from your Retirement Bucket™ each year to supplement your social security, pensions, and rental property income (if you own rental property),
2. The Size of your Retirement Bucket™: the amount of money you’ve accumulated over your lifetime to draw from to provide this supplemental income, and
3. Inflation

The good news for you is that I’ve outlined how you can determine your level of dependence using steps one and two of The Relaxing Retirement Formula™ over the last few weeks.

Have you done your homework? If not, and you want to confidently spend what you’ve taken your entire life to accumulate without fear, I can’t urge you enough to take these initial steps.

Calculating the size of our Retirement Bucket™ comes down to you having accurate and up-to-date statements on all of your bank and investment accounts. Given that we’re at the beginning of a new year, you should be able to put your hands on December 31, 2011 statements rather easily.

That brings us to #3. As we discussed last week, when it comes to inflation, you have to make some assumptions as to what you believe the rate of inflation will be in the future. Without going into too much detail on that issue here (I’ve gone into great depth about my opinion on inflation in a prior Strategy and will do so in the future), I strongly recommend that you assume a higher rate of inflation than the present to be conservative.

Getting back to Steps One and Two, once you know your level of dependence, i.e. the amount of money you need to withdraw from your investments each year to keep pace with inflation, and you know the amount of money you’ve accumulated in your Retirement Bucket™, the rate of return you “need” to earn is the rate that allows your money to remain intact year after year while allowing you to continue to spend what you want.

Can you see why you must know this?

If you have a large Retirement Bucket™, and you only need to withdraw a little bit each year for your supplemental income needs (like John and Mary Independent in our case study over the last few weeks), you probably don’t need to earn a very big rate of return.

On the other hand, if you need to withdraw a lot of money each year from your Retirement Bucket™ like Ron and Rose Reactionary, you may need to earn a much bigger rate of return.

Either way, the key is knowing that rate because if you don’t, you may very well be investing more aggressively than you need to and subjecting yourself to far more volatility than you need to.

And, at the same time, if you don’t know the rate you need, you may be investing too conservatively and run out of money because your money isn’t growing fast enough to keep up with your spending needs.

Committed To Your Relaxing Retirement,

Jack Phelps, ChFC

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to info@TheRetirementCoach.com. Or they can subscribe at our website!

Thank you!

As we discussed last week, investing in your retirement years without first knowing the investment rate of return that you MUST earn is the equivalent of taking a new potent drug because it’s popular and everyone’s talking about it!

When we use the medical analogy, it seems ridiculous.  Yet, this is what the overwhelming majority of retirees do.

They blindly read a magazine, watch a television show, or meet with an investment salesperson and froth at the mouth over the latest new “Can’t Miss / Hot” investment.

Don’t get lazy and fall into the trap.  Do whatever is necessary to discover the investment rate of return you MUST earn first.

How Do You Determine Your “Rate”?

The investment rate of return you must earn is dependent on three factors:

1. Your Level of Retirement Bucket™ Dependence: how much money you need to withdraw from your Retirement Bucket™ each year to supplement your social security, pensions, and rental property income (if you own rental property),
2. The Size of your Retirement Bucket™: the amount of money you’ve accumulated over your lifetime to draw from to provide this supplemental income, and
3. Inflation

The good news for you is that I’ve outlined how you can determine your level of dependence using steps one and two of The Relaxing Retirement Formula™ over the last few weeks.

Have you done your homework?  If not, and you want to confidently spend what you’ve taken your entire life to accumulate without fear, I can’t urge you enough to take these initial steps.

Calculating the size of our Retirement Bucket™ comes down to you having accurate and up-to-date statements on all of your bank and investment accounts.  Given that we’re at the beginning of a new year, you should be able to put your hands on December 31, 2011 statements rather easily.

That brings us to #3.  As we discussed last week, when it comes to inflation, you have to make some assumptions as to what you believe the rate of inflation will be in the future.  Without going into too much detail on that issue here (I’ve gone into great depth about my opinion on inflation in a prior Strategy and will do so in the future), I strongly recommend that you assume a higher rate of inflation than the present to be conservative.

Getting back to Steps One and Two, once you know your level of dependence, i.e. the amount of money you need to withdraw from your investments each year to keep pace with inflation, and you know the amount of money you’ve accumulated in your Retirement Bucket™, the rate of return you “need” to earn is the rate that allows your money to remain intact year after year while allowing you to continue to spend what you want.

Can you see why you must know this?

If you have a large Retirement Bucket™, and you only need to withdraw a little bit each year for your supplemental income needs (like John and Mary Independent in our case study over the last few weeks), you probably don’t need to earn a very big rate of return.

On the other hand, if you need to withdraw a lot of money each year from your Retirement Bucket™ like Ron and Rose Reactionary, you may need to earn a much bigger rate of return.

Either way, the key is knowing that rate because if you don’t, you may very well be investing more aggressively than you need to and subjecting yourself to far more volatility than you need to.

And, at the same time, if you don’t know the rate you need, you may be investing too conservatively and run out of money because your money isn’t growing fast enough to keep up with your spending needs.

Committed To Your Relaxing Retirement,

Jack Phelps, ChFC

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to info@TheRetirementCoach.com. Or they can subscribe at our website!

Thank you!

Wellesley, MA – February 15, 2012  - Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (http://www.theretirementcoach.com) urging retirees to define the specific obstacles that they face. The article, titled “Why It’s All Different Today,” explains that gaining an objective perspective of your financial picture allows you to approach retirement with confidence.

Jack Phelps writes, “Developing and maintaining supreme financial confidence is more necessary and critical today than ever before.”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at http://www.theretirementcoach.com/articles/why-its-all-different-today-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit http://www.theretirementcoach.com

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program^™ back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1992, he received his Chartered Financial Consultant designation from The American College in Bryn Mawr, Pennsylvania. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

However, if you want to develop true financial independence, and be in a position to make rational decisions about your future based on fact, then you have to first determine your level of Retirement Bucket™ Dependence.

In a previous blog, we discussed two couples, both age 65.  As a refresher, here’s what we know about them:

Each couple has $1 million dollars in investments in their Retirement Bucket™, the same social security retirement income, and the same pensions.

John and Mary Independent have no mortgage or home equity line of credit, and have recently completed many of the major upgrades to their home, i.e. a new roof, vinyl siding, a new furnace, and new bathrooms.  They have always lived a very modest lifestyle with little or no debt.

Ron and Rose Reactionary still have $260,000 outstanding on a second mortgage they took out to pay for their kids’ college tuitions and weddings, and a condo down in Florida they bought a few years back.  They both drive high end cars.  And, while their home is very nice, after 29 years, it’s starting to look “tired” and could use some upgrades.

The obvious difference between the two couples is the COST of their lifestyle.

Ron and Rose’s lifestyle is much more expensive.  The key is knowing just how expensive so we can determine your level Retirement Bucket™ Dependence.

And, that’s the first step in The Relaxing Retirement Formula™ that we’re going to tackle today.

How Much Does Your Lifestyle Cost?

As unexciting as the task appears, the first step toward you realizing your Relaxing Retirement is for you to have a clear handle on what it costs you to live exactly the way you want!

If you don’t know, I can guarantee, from 22 years of experience working hands-on with so many of you, that you will have unnecessary anxiety for the rest of your life and “pull your punches” by restricting your spending because you don’t know if you have enough.

Or, you will continue to work because you think you “have” to, when in fact you may not “have” to.

So, the first step toward a relaxing retirement is to have a clear handle on what it costs you to support your desired lifestyle.

As I mentioned, I recognize that this may not be the most pleasant exercise you’ve ever been through.  However, it’s the key to reducing your anxiety level.

Do I Now Have To Live On a Budget?

Before we delve into the best way to calculate your level of Retirement Bucket Dependence, I want you to know that this is NOT about living on a “budget” and restricting your spending.

This is about having an “accounting” of what it costs you to live the way you want so that you can have a measuring stick to make decisions.

There’s a big difference.

How to Carve Up Your Spending into Bite-Sized Chunks

There are two major categories of ways that you spend your money.  The first is the typically bigger, one-time expenses, like renovating your kitchen or bathroom, landscaping projects, paying for your children’s wedding (hopefully only once), or purchasing a car, etc.

Think about the next five years.  Is there anything you’d really like to do that would fall into this category?  Write down your wish list right now, and then rank them in order of priority.

You want to know right now what you’re going to need to spend money on, not five years from now when you “suddenly” need the money.

Fixed and Discretionary Expenses That Repeat

Once you’ve done this, you can jump to the other category of spending; those which repeat themselves year after year.  And, under this category, there are some which are “fixed” or mandatory, and some which are “discretionary” (your choice based on your priorities).

Typical “fixed” expenses include utilities, insurances, groceries, clothing (at least most clothing falls under this category), mortgages, real estate taxes, etc.  These are expenses that must be paid, and typically they’re paid every month.

“Discretionary” spending, on the other hand, is where we’d like to spend all of our money!  However, when planning, most people don’t account for them as much as they should.  Things like vacations, presents for your grandkids, meals out, and entertaining, etc.

Remember, this is all about living exactly the way you want, so you want to be generous with your estimates.  If you guess too low, you’re only shortchanging yourself.

Looking Forward

Once you’ve identified precisely what it costs you to support the lifestyle you want, we now want to see what your spending looks like, not just today, but many years into the future.

And, when we talk about the future, we have to talk about INFLATION because what costs a dollar today certainly won’t cost a dollar ten years from now.

When you project your spending into the future, you have to build in a conservative inflation figure (the amount by which your expenses will go up each and every year on the same goods and services you currently purchase right now).

For example, if inflation averages a mere 3%, that $100 worth of groceries you just picked up will cost you $135 in ten years.  And, this only assumes a 3% inflation rate.

To be more realistic and conservative in your planning, I recommend that you build in a higher inflation figure.  That’s not being negative.  It’s being realistic, especially in light of the massive amount of debt financing being used by our federal government right now.

The Next Step

Once you have this information in your hands and you have your own unique set of numbers, you’re well on your way to enjoying a relaxing retirement where you’re not dependent on the income from work to support your lifestyle.

In our next blog entry, we’re going to delve into the next step of The Relaxing Retirement Formula™, and determine your level of Retirement Bucket Dependence so you can identify how much you can confidently spend.

And, that’s what it’s all about.  You want to be able to confidently live exactly the way you want without worrying if you’re going to run out of money.

The next step is figuring out how you’re going to pay for it all without having to depend on the income from work to do it.

And that’s what we’re all after. Discovering that you have built up enough money to support your lifestyle without “having to work” is one of the most liberating days of your life.

It changes everything! It flips the entire equation in your favor.

That’s why at the beginning of every year, I urge you to lay the foundation for all of your planning and strategizing by first figuring out where you stand in relation to this goal of total financial independence.

Too often, people want to skip right over into more advanced strategies.

However, before you can begin to delve into tax strategies, investment strategies, or estate planning strategies, etc., you have to be crystal clear on where you stand in relation to your biggest goals.

And, the biggest goal I’ve heard the most over the last 23 years is “to be able to live the way we want without running out of money.”

The Second Step in The Relaxing Retirement Formula

As we’ve outlined over the last few weeks in studying John and Mary Independent vs. Ron and Rose Reactionary, it’s critical that you determine your level of dependence on your Retirement Bucket™, i.e. your retirement savings.

Do you need $1,000 per month over and above social security and a pension? Or do you need $10,000 per month?

As you might expect, there’s a huge difference.

If you’ve been following right along, then you answered the first half of that equation previously.

Now, to determine your level of dependence on your Retirement Bucket™, we need to figure out how you’re going to pay for the lifestyle you’ve outlined.

How much income will automatically come in?

When it will come in?

And, will it automatically keep pace with inflation?

Typically, fixed income sources in retirement fall into three main categories: social security, pensions, and rental property income, so let’s take a closer look at each of them.

Social Security

Let’s start with Social Security. If you and your spouse are already receiving social security retirement income, then you already know what your income is.

However, if you haven’t begun receiving your benefits, you want to determine the amount you’ll both receive as early as age 62 up to your “full” retirement age (typically age 66 if you’re reading this).

You should receive a social security benefits statement every year around your birthday which reveals your anticipated benefits under all options.

Pensions

The second source of fixed income is pensions. Under pensions, there are two main ways to receive a pension payout: as a lump sum check or as a monthly annuity (a monthly check).

If you can receive your pension in a lump sum, it is typically transferred directly to an IRA tax free and you are in charge of “creating” income from this lump sum of money in your IRA. It doesn’t happen automatically.

Assuming for a moment that you are receiving, or will receive, your pension in the form of a monthly annuity, you may select the single life annuity version (which ends at your death and does not continue to your spouse).

Or, you can select one of a variety of joint and survivor options to insure that your spouse receives some pension benefits when you pass away. If you’ve already retired, you may have already seen these: 100% joint and survivor, 50%, 66 2/3%, 10 year period certain, etc.

The key is to maximize your benefits while protecting your spouse in the most cost efficient manner. (I’ve explored the pros and cons of this in past articles and blogs, and will do so again soon)

Rental Property Income

Fixed income source #3 is rental property income. This is a place which requires you to do some real honest homework. And, that’s because what we’re looking to determine is “net” rental income, not gross.

Many people focus on the rent check(s) they receive each month. That’s a good start, but from that gross check each month there are numerous potential expenses that have to be taken into consideration: real estate taxes, mortgages (if you still have one), utilities (if you’re paying them), and most importantly, maintenance and repair.

Properties require upkeep. And, if you’re not the one doing the work, this can be quite costly. So, an honest, rational projection of future maintenance costs should be factored in to determine your “net” rental income that you can expect.

Once you have a clear picture of all 3 of these potential monthly income sources, we have to examine what they look like in the future. This is where we will continue in our next blog entry in this series.

Stay tuned!

Wellesley, MA – February 7, 2012 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (http://www.theretirementcoach.com) urging retirees to ignore general, non-specific financial advice. The blog, titled “Putting ‘Rules of Thumb’ to Bed,” explains why you have to make financial decisions based on ‘your numbers’ only.

Jack Phelps writes, “If the consequences of blindly following rules of thumb like this weren’t so costly and dangerous, I’d settle for just saying they’re silly. However, the stakes are just too high.”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire blog can be found at http://www.theretirementcoach.com/blog/putting-rules-of-thumb-to-bed-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit http://www.theretirementcoach.com

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program^™ back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1992, he received his Chartered Financial Consultant designation from The American College in Bryn Mawr, Pennsylvania. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

Over the last few weeks, I’ve exposed you to the first steps in The Relaxing Retirement Formula™ which were all developed to help you determine your level of Retirement Bucket™ Dependence (the investments you’ve built up over your lifetime).

You’ve done this by getting crystal clear on all of your income sources, and what it costs you to support the exact lifestyle you want.

This is THE biggest distinction between investing during your working years and your retirement years, and it’s the point that I will continue to help you focus on.

Every “retirement calculator” discussion or article I read begins with you assuming an investment rate of return you either want or think you can get.

This completely puts the cart before the horse. It’s what gets so many people into trouble, and what causes so much confusion and anxiety.

Once you’re past the first steps in The Relaxing Retirement Formula™, and you know how dependent you are on your Retirement Bucket™, the next question is, “what rate of return do I need to earn?”

That rate isn’t chosen arbitrarily. It’s the rate of return that allows your money to keep pace with inflation and remain intact year after year while allowing you to continue to spend what you want.

Consequences

When you’ve reached the stage where the money you’ve saved must now support you for the rest of your life, when you are dependent on your money to “live” as opposed to receiving a paycheck from the work you do, you have to think very differently about how you’re investing your money.

This is no longer a game. It’s no longer a race. You can’t afford to lose this time because, if you do, you’ll be forced to do one of two things:

1. make drastic cutbacks in your lifestyle (who wants to do that after working all these years in preparation for this stage in your life where you get to reap all the rewards of being a diligent saver), or
2. you will have to go back to work to make up for the losses, something your health could prevent you from doing in the future.

Neither of those sound like very good outcomes, so that’s why you have to think differently about investing at your stage in life.

And, it’s why you have to know the rate of return you must earn, as opposed to randomly investing your money in whatever appears to be the ‘hot’ thing at the moment.

The Medical Analogy

To draw an analogy, it would be like you taking a new medication without a doctor first analyzing your symptoms and doing a thorough examination to determine if you even need any medication at all.

When asked why you’re about to take this new potent drug, the doctor tells you that it’s a really popular drug right now. It’s all over the news and everyone’s taking it.

Now, if that sounds ridiculous to you, you’re right. However, this is how millions of Americans select their investments in retirement.

They don’t have a carefully calculated rate of return they’re aiming for. And, because they don’t, they’re at the mercy of the next salesperson who sells them whatever makes that salesperson the most money, or whatever appears to be “hot”.

For all the reasons I mentioned above, this is extremely dangerous. Don’t be lazy and fall into this trap. Take the time to figure out the rate of return you need to earn first.

Then you can go about crafting an investment matrix and specific investments that have the highest likelihood of getting you that rate of return over the long run.

However, before we move on to that crucial step, we have to determine the investment rate of return that YOU need to earn.

We’ll do that in the next Retirement Coach Strategy of the Week!

Committed To Your Relaxing Retirement,

Jack Phelps, ChFC

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to info@TheRetirementCoach.com. Or they can subscribe at our website!

Thank you!

We’re getting there!

Over the last few weeks, I’ve exposed you to the first steps in The Relaxing Retirement Formula™ which were all developed to help you determine your level of Retirement Bucket™ Dependence (the investments you’ve built up over your lifetime).

You’ve done this by getting crystal clear on all of your income sources, and what it costs you to support the exact lifestyle you want.

This is THE biggest distinction between investing during your working years and your retirement years, and it’s the point that I will continue to help you focus on.

Every “retirement calculator” discussion or article I read begins with you assuming an investment rate of return you either want or think you can get.

This completely puts the cart before the horse.  It’s what gets so many people into trouble, and what causes so much confusion and anxiety.

Once you’re past the first steps in The Relaxing Retirement Formula™, and you know how dependent you are on your Retirement Bucket™, the next question is, “what rate of return do I need to earn?”

That rate isn’t chosen arbitrarily.  It’s the rate of return that allows your money to keep pace with inflation and remain intact year after year while allowing you to continue to spend what you want.

Consequences

When you’ve reached the stage where the money you’ve saved must now support you for the rest of your life, when you are dependent on your money to “live” as opposed to receiving a paycheck from the work you do, you have to think very differently about how you’re investing your money.

This is no longer a game.  It’s no longer a race.  You can’t afford to lose this time because, if you do, you’ll be forced to do one of two things:

1. make drastic cutbacks in your lifestyle (who wants to do that after working all these years in preparation for this stage in your life where you get to reap all the rewards of being a diligent saver), or
2. you will have to go back to work to make up for the losses, something your health could prevent you from doing in the future.

Neither of those sound like very good outcomes, so that’s why you have to think differently about investing at your stage in life.

And, it’s why you have to know the rate of return you must earn, as opposed to randomly investing your money in whatever appears to be the ‘hot’ thing at the moment.

The Medical Analogy

To draw an analogy, it would be like you taking a new medication without a doctor first analyzing your symptoms and doing a thorough examination to determine if you even need any medication at all.

When asked why you’re about to take this new potent drug, the doctor tells you that it’s a really popular drug right now.  It’s all over the news and everyone’s taking it.

Now, if that sounds ridiculous to you, you’re right.  However, this is how millions of Americans select their investments in retirement.

They don’t have a carefully calculated rate of return they’re aiming for.  And, because they don’t, they’re at the mercy of the next salesperson who sells them whatever makes that salesperson the most money, or whatever appears to be “hot”.

For all the reasons I mentioned above, this is extremely dangerous.  Don’t be lazy and fall into this trap.  Take the time to figure out the rate of return you need to earn first.

Then you can go about crafting an investment matrix and specific investments that have the highest likelihood of getting you that rate of return over the long run.

However, before we move on to that crucial step, we have to determine the investment rate of return that YOU need to earn.

We’ll do that in the next Retirement Coach Strategy of the Week!

Committed To Your Relaxing Retirement,

Jack Phelps, ChFC

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to info@TheRetirementCoach.com. Or they can subscribe at our website!

Thank you!