More than you might think.
So, how is retirement planning in the 21st century similar to the modern Olympics pentathlon?
Today, we turn to The Des Moines Register’s article, “How the pentathlon reflects retirement planning,” for the answer.
Did you know that the pentathlon consists of five events: fencing, swimming, show jumping and combined running and shooting?
Fencing. When fencers spar, think of investors balancing risk and return in their portfolios.
With riskier assets, you get a better return potential.
On the other hand, safer investments help limit your vulnerability in a down market.
In the end, a sound asset allocation strategy is like the parrying of the contestants … whether to go for broke (literally and figuratively) or balance the attack.
Swimming. The water and the waves in pool lanes create resistance and drag for swimmers. And the water is never just smooth as glass during the race.
You may similarly experience times of resistance and slowing in your portfolio. For example, recall times of an economic recession or an interest rate hike.
The way to get around this?
A diversified portfolio can help you withstand the waves and be ready to seize an opportunity when market conditions improve.
Show Jumping. This component of the pentathlon involves jumping over barriers while on horseback, which is no easy task.
Obstacles can appear in life beyond market and economic risks. No doubt, they can ruin a well-planned retirement.
Bank on it.
Taxes that will be part of your life and inflation will increase your cost of living over time.
Just make sure you do not trip over a barrier.
Instead, plan ahead for what might occur.
Foot race. The pentathlon concludes with foot racing and shooting at targets.
Think of this phase as the final stretch in the years leading up to retirement.
Likely you will be trying to save as much as possible.
Part of this training requires preparing for potential health care costs in retirement, teaming with an experienced estate planning attorney to create a proper estate plan and including risk management elements in your financial plan.
Even pentathletes take time out to focus on life itself.
Do not get consumed and focus all of your energies entirely on your finances.
Remember to think about the reasons why you are saving and what matters most to you.
This can help you stay committed to your long-term goals and make your retirement "gold medal" enjoyable.
Reference: The Des Moines Register (August 1, 2016) “How the pentathlon reflects retirement planning”
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