Making smart investments is a lot like playing poker. Much like how many people aren’t skilled at poker, many of us don’t have a clue about how to be retirement-ready. This surprises me since we can already know our annual salary, but we don’t know how much money we’ll need for when we don’t have to work 30 years later.
According to my mentor in poker, the goal in any game is to win 2 or 3 hands in an hour—a good pace for any player. Even while you’re protecting your money in each hand, you have to be willing to lose some money while playing. We never want to risk more than we’re prepared to lose.
It’s true not only in how we play poker but how we manage our money. We hope for the best, but many of us don’t prepare for the worst. So the question is, how can we learn from the past and keep our investments strong the next time we’re faced with a sudden downturn?
As an example, look at how much time we spend planning a vacation. I’ve heard from a few travel agents that the number two spots for a destination are Hawaii and Italy. Both are appealing locations, but only you can determine where you’re going and how much you’re willing to spend. If the average tourist looks up 7 different hotels before choosing the right one, then why not take the same time to go over our options for retirement plans and decide how much money we’ll need 30 or 40 years from now?
Going back to poker, we’ll consider in each game the odds of winning versus losing, and how many chips we’re willing to commit to a hand. The same principles apply to money management, knowing what your level of risk you’ll accept and what losses you don’t want to take. If you want to withdraw $40,000 in 30 years, maybe you’ll need to set aside a million dollars so that you can safely pull out that 4-percent sum from your funds every year.
Once you know what your financial goals are, you’ll be able to decide how and when you’ll be retirement-ready.
Do you need other questions answered about your financial future? Feel free to contact me at email@example.com for a free investor’s consultation.
John L. Grace
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Investors Advantage and NPC are separate and unrelated companies.