Happy Anniversary!

We’re going to take a short break in the action this week in order to wish you an emphatic HAPPY ANNIVERSARY!

I’m serious.

There’s actually a spectacular strategic lesson imbedded in it so it’s not all celebration.

What anniversary are we celebrating you may be asking?

Well, unlike you or I forgetting our wedding anniversaries and getting into hot water with our spouses, if THIS anniversary doesn’t immediately pop into your head, that’s a good thing.

Five years ago this Sunday, March 9, 2009, marked “the bottom”.

On that day, the value of the broad stock market index, the S&P 500, hit its bottom during the housing crisis led market “crash”.

To be specific, after the collapse of Lehman Brothers in early September, 2008, the value of the largest companies in the world (as measured by the S&P 500 Index) fell to 752 on November 20, 2008.

(If you’ve been a Relaxing Retirement member for a while, you may recall our Fall 2008 “Let’s Make a Deal” Member Event at The Marriott starring me as Monte Hall right in the middle of the crisis.)

Right after the event, the value of the S&P Index proceeded to climb back to 903 to close out 2008, only to plummet back down again and hit bottom at 677 on March 9, 2009.

Do you remember what was splattered all over the news back then?

As you may recall, it was nothing but second-by-second chaos and predictions of the world as we had known it up until that moment ending.

Try and remember exactly how you felt back then.

Did they scare you enough to get you to fold your tent and sell your carefully orchestrated ownership of the great companies of the world as it did for millions of retirees across America?

The reason I ask is that if you fast forward five years to last Friday, February 28, 2014, the value of the same S&P 500 Index stood at 1,859! (Remember that the price back on March 9, 2009 was 677)

That represents a price increase of almost 175% over that five year span. And, this doesn’t include the dividends you would have received for maintaining ownership during those years which represented approximately 2% more in return per year.

Over that same time frame, the small cap Russell 2000 Index grew 245%.

Now, this is not about rubbing salt into wounds or about saying “I told you so”.

There’s a lesson and a very important strategy involved that is critical to you experiencing the relaxing retirement you desire and deserve.

The key lesson and strategy is that if (and only if) you’ve done your homework and prepared properly, then you have the structure in place to weather a storm like the events that led up to March 9, 2009, and maintain your financial confidence, i.e. confidently spend and invest.

Now, what does it mean to have “done your homework and prepared properly”? What this means is:

  1. you’ve determined the amount of money you need to withdraw from your Retirement Bucket™ each year for your spending needs,
  2. you’ve calculated the investment rate of return you need to earn to produce the lifestyle sustaining income you need to withdraw without running out of money,
  3. you’ve set aside funds in short term instruments to satisfy your withdrawal needs for several years so you’re not forced to sell at inopportune times because you “need” the money to support your cash flow needs,
  4. you’ve carefully selected ‘which’ accounts you’re going to draw from so you pay the least amount of income taxes you’re legally obligated to pay,
  5. you’ve strategically allocated and diversified your long term holdings among a carefully orchestrated mix of asset classes with full knowledge that they will each perform differently during various market conditions over your lifetime,
  6. you’ve strategically planned ‘where’ you’re going to hold your various investment holdings to take advantage of lower capital gains tax rates vs. higher ordinary income tax rates, and
  7. you assess the allocation of your holdings on a strict timetable and objectively rebalance with the full understanding that market price corrections have always been and will continue to be a normal and regular occurrence in your investment lifetime.

If you follow and adhere to this Relaxing Retirement Formula, then the ugly events that took place leading up to March 9, 2009 are a short term annoyance, but not something that causes you to abandon and dismantle your ownership of what you’ve carefully planned to provide the lifestyle sustaining income you need for the rest of your life.

You simply go to step 7 (above) and take advantage of the opportunity to own more inflation fighting investments at bargain prices.

Now THAT’S something worth celebrating!

Committed To Your Relaxing Retirement,

Jack Phelps
The Retirement Coach

P.S.WHO do you know who could benefit from receiving my Retirement Coach “Strategy of the Week”? Please simply provide their name and email address to us at info@TheRetirementCoach.com. Or they can subscribe at www.TheRetirementCoach.com.I appreciate the trust you place in me. Thank you!