Protect Your Financial Confidence
with Meaningful Specifics

Good Morning Relaxing Retirement Member,

I had a wonderful conversation with a Relaxing Retirement member last week that I’d like to share with you, especially as we begin another year together.

They both retired earlier this year so keeping the 4th quarter market correction we just experienced (the sharpest since 2013) in perspective has to be more challenging than it is for members who have been with us through many downturns over the years.

Even after reading all the historical statistics we’ve revealed which demonstrate how temporary market downturns have been.

After experiencing markets like this with our Relaxing Retirement members over the last 29 years, I know just how troubling all of the bad news is to deal with, especially when you’re at the stage in your life where you’re dependent on The Retirement Bucket™ you’ve built to support you as opposed to relying on the income from the work you do.

It can be challenging to remain confident when the overwhelming majority of voices you hear are negative and scared.

It’s not easy, and it’s not fun.

While the correction we have experienced thus far is much, much less severe than the financial crisis of 2008-2009, my recommendation to this couple was exactly the same.

The strategy we discussed is both psychological and practical.

I will say ahead of time that I recognize this may appear to delve deeper than necessary, and that I run the risk of having you gloss over it.  However, I believe you have to first understand the way the human brain works.

We’re All Hard Wired

Studies have shown that the human brain is broken down into three sections: reptilian (back), mammalian (center), and frontal.

The two critical points of understanding for the purpose of our conversation are that the reptilian portion of our brain is our most primitive in that its response mechanism is dictated by “primal instincts”.  Essentially, it’s where our “fight” or “flight” reactions come from when we’re faced with any danger.

By contrast, our frontal lobe is where all critical thinking takes place, i.e. reason, analysis, prioritizing, rational thought, etc.

Now, what does this have to do with how I personally deal with challenges and what I recommended for this couple, and you?  Answer: Everything

The key point is that when we’re faced with a challenge (danger) like we just experienced with the 4th quarter market correction, our initial reaction stems from our reptilian primal instinct, i.e. “fight or flight”.  To overcome this, we have to consciously move beyond this “primal instinct.”

Our brain can only deal with specifics.  Vague generalities, like what we’re fed every day by the media, do not help us obtain the clarity we need to make rational decisions, and, in turn, develop and maintain the confidence we need.  Instead, these vague generalities only serve to paralyze us.

Because of this, my reaction to all challenges is to de-emotionalize myself as quickly as possible in order to place it all in proper perspective.  In other words, I fight to stop the “reptilian” part of my brain from kicking in and dictating my response in a knee-jerk fashion.

Instead, I consciously write out all of the “perceived” dangers, obstacles, and setbacks in specific detail on a sheet of paper.

I then do whatever is necessary to quantify all of them as they apply to me and those around me so that I can make rational decisions and react with a well thought out plan.

How You Can Use This Today

With current market and political turmoil, negativity is pervasive.  It’s everywhere.

However, each of us has a choice.

We can either engage in the “group think” perpetuated by the media, or we can get specific about what’s really true in your life because your brain can only deal with and act on specifics.

Let’s take a look at a few of the conflicting and confusing “group think” pieces of information and headlines reported by the media that you’ve undoubtedly heard or read over the last week:

  • 2018 Was the Worst Year for U.S. Stocks Since 2008
  • Stocks Whipsaw as Global Growth Concerns Dog Investors
  • Man Who Called Dow 20,000 Says if We Avoid a Recession, We’re Going to Have a Really Good Stock Market
  • President Trump Declares December’s Market Turmoil a “Glitch” and That Stocks Will Correct Back Once a Trade Deal is Settled
  • Prolonged Government Shutdown Threatens to Derail Markets
  • Investors are Betting That Fed Hits Pause on Rate Hikes

The challenge with all of this conflicting and confusing “information” is that it’s just a bunch of vague generalities.  It’s useless in helping you make rational decisions in your own life.

The Alternative:
Meaningful Specifics

In contrast, here’s an “example” of meaningful specifics that would help you make rational decisions, and thus help you develop and maintain your level of confidence.  Assume for a moment that these facts are your facts:

  1. The amount of income you receive from social security and your pensions is $5,000 per month.
  2. Your fixed monthly expenses (per your Lifestyle Cost Estimator™) are $6,000 including income taxes.
  3. Your discretionary expenses are $7,000 per month in order to live the way they want, including vacations and gifts for your grandchildren.
  4. Given this, you need $8,000 per month ($5,000 of fixed income minus $6,000 for your fixed expenses and $7,000 for your discretionary expenses) from your Retirement Bucket™ of investments in order to make up the difference.
  5. Your Retirement Bucket™ balances, after December’s market correction, now total $2,450,000.
  6. You and your spouse are 66 years of age and want to plan for at least another 26 years until age 92.
  7. You’d prefer to live in your current home and your small condo in Florida as long as possible, so you don’t want to “count” the equity in your homes in your forecasts. If you had to, you would downsize at some point in your life, but would prefer not to “have” to.
  8. The nominal annual investment rate of return we determined that you needed to earn in order to continue your monthly Retirement Bucket™ withdrawals of $8,000 (plus a healthy 5% cost of living increase each year) was 5.0% back in June.
  9. Today, after six more months of withdrawals and the market correction’s impact on your Retirement Bucket™ balances, you now need to earn 5.5% per year.

Given these meaningful specifics, i.e. “knowing your numbers cold”, this example illustrates how you would now know exactly where you personally stand in relation to current market conditions based on your own unique priorities and resources.

It may not provide you with what you might interpret as “good” news.  However, it does provide you with facts that you can make decisions with, such as how you choose to position your Retirement Bucket™ from here forward, or how you choose to spend in the future.

Reading the newspaper, turning on the television, and/or checking on-line on your phone, laptop, or iPad throughout the day to see where the market is will not provide you with usable information with which you can act.

It only further perpetuates a lack of confidence, and, in turn “paralysis.”

Given the stage in life that you’re experiencing right now where The Retirement Bucket™ you have accumulated over all these years must now support you, you have every right to be anxious and frustrated.

However, as I just illustrated, do everything you can to focus on meaningful specifics as opposed to the vague generalities splattered all over the news every day so you can continue to confidently live the way you want.

Here’s to a confident and rewarding 2019 for you!

Committed To Your Relaxing Retirement,

Jack Phelps
The Retirement Coach

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(The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)