What a Difference Four Years Makes!

Does March 9. 2009 have any significance for you?

Does it even ring a bell? If it doesn’t, that will be very meaningful sign for you in a moment.

March 9, 2009 marks the day that the value of the broad stock market index, the S&P 500, hit its bottom during the recent 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.

They proceeded to climb back to 903 to close out 2008, only to plummet again and hit bottom at 677 on March 9, 2009.

Do you remember how you felt back then? What was splattered all over the news?

As you may recall, it wasn’t very good. In fact, it was panic city in every major news outlet all over the world.

Did it scare you enough to get you to fold your tent and sell your carefully planned and selected investments in the great companies of the world as it did for millions of retirees across America?

If it did, there’s no shame as it was truly a scary time.

However, it’s extremely unfortunate for you because of the long term consequences.

The reason I say that is if you fast forward approximately four years to February 28, 2013, the value of the same S&P 500 Index stood at 1,515!

That represents a price increase of almost 124% over that four 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.

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 on 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,

  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,

  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 several different asset classes and investment styles 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 and value 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 of 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.

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!