I’m just trying to keep from getting poor!

My friend Allan is not prone to rant, but he was on a roll. “I’m serious, I’m no longer trying to get rich, I’m just trying to keep from getting poor!” His tone of voice was heart attack serious; he was not smiling.

Allan’s face was beet red. “Don’t talk to me about magic numbers, hell we blew 20% past it just to make sure. Don’t look at my portfolio and tell me I’m rich compared to others who were unable to save money, that’s crap! I was told for 20 years that if I followed the rules and hit our investment targets we would earn enough money to maintain our lifestyle. Once we got to the top of the mountain, we could coast the rest of the way, do a lot of cool stuff and not have any money worries. Well, it’s not happening!”

Allan was a successful businessman and a good saver. He understands investments and worked with financial planners for years. His recent rant echoed the fears of many baby boomers that are now hit in the face with reality as they cross over the retirement threshold. Most of the investment “assumptions” they counted on for decades disappeared – probably forever.

I knew better than to tell him to calm down, so I let him finish. I then asked, in a calm voice, “Help me understand. Is your concern that your nest egg is drawing down too quickly, or is it that you are constantly worrying because you feel you have too much at risk?”

He paused to catch his breath. His tone of voiced changed as he said, “All of the above to some extent. We have not had a major stock correction is years; we have way too much money at risk, and yeah I am constantly worried.”

He gave an example. “One of the things we planned to do was take the grandchildren on a cruise. It cost over $20,000. I had a terrible time because I was constantly worried about the money we were spending. My wife and I planned on doing some really fun things, now I am reluctant to spend the money. I feel guilty, like I let her down if I say no.

At this point in life, I counted on having 70% of our portfolio in CD’s and top quality bonds living off the interest. To get any kind of return we have closer to 70% in the market. What happens if it tanks, which it will sooner or later, it always does? Damn right I’m worried!”

At we continued our discussion we concluded there were several things Allan must do if he was ever going to enjoy his retirement.

1. His anger about the past and all the “assumptions” is wasted emotion. We are all powerless to change things back to the way they were; we need to learn how to play the new game. Look at today’s investment world as a new challenge that we can figure out. Saying it that way doesn’t sound so bad.

2. Retirees did not worry about money in the past because they felt it was safe. CD’s and top quality bonds offered good yields and were safe from default. While those options no longer exist, there are still plenty of very safe investments. Combine them with proper diversification, position sizes and stop losses we can protect the bulk of our portfolio from catastrophic losses. Combining safety and good return is still possible; we just must approach things a bit differently.

3. Recalibrate your investment mind set. While Allan is wise looking for help, don’t get caught up in the “get rich quick” hype that bombards your inbox daily from experts trying to sell their services.

Shortly after I retired I bought a very expensive newsletter hyping they had close to 200 consecutive trades without a loser. I never made a dime and they shut the letter down within a year. Tune them out. One rule of thumb I use is this. The write up contains hype, and education about their company, market, competition and potential. The more the hype, the less attention you should pay to it. I want to be totally educated about a potential investment, not sold on why I should buy it.

4. Make sure your sources are locked in to your demographics. There is a lot being written today about robo-advisors and they do have some merit. One company prides itself on targeting the 30-something that is computer savvy and does not have time to spend on investing. If you fit that mold, great take a look at it. If you are close to being retired, that model will take way too much risk. You must find one geared to the preservation of capital mindset.

5. There is no “set it and forget it”. Things are changing quickly. You can set your safety systems in place, but you better not forget it. Staying on top of things will help protect your assets, and also build your confidence.

6. Allan can’t will himself to stop worrying. However, setting up a new safe system, monitoring it, and keeping a running score will go a long way to ease the worries. Allan’s tired of being a scrooge and always saying no. He wants to know he can spend some money, enjoy his retirement and not have to worry.

It’s sad when I hear from people who have played by the rules, saved their money, surpassed their savings goals and they are still worried about money. In most cases, they still have plenty of money; but need to understand how to invest it safely NOW, before the market corrects and really hurts them. You worked hard to get rich, now is not the time to be constantly worried about getting poor.

Can Allan put together a safe portfolio? Sure he can; however it takes a bit more work, and strict discipline to conservative investing. The goal is to diversify as much as possible so no single company, industry, country or currency can bring about catastrophic losses to your life savings. While you may not make spectacular gains, remember your goal is to keep from getting poor.

Until next time…

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