the current financial crisis reminds me of a cartoon I saw years ago in Paris. bungee jumper is worried about getting a jump off a bridge, so he checked his armor. Fine. He checked his connection with the bungee cord. Fine. He checked the cable itself. Fine. He checked the cable connection on the bridge. Fine. Persuasion, jumps and breaks the bridge!
under the bridge financing many of us have broken. This is particularly destabilizing for retirees and those soon to retire. They followed all the rules about diversifying their investments. They checked and double checked the basics. Finally, they plunge and invested carefully. But now drowning in the river below without a life raft, and I have no idea how to get back to where they were in such a short time ago. "I did everything right, he is not fair!" they cry.
No doubt the markets will be back after this crisis is over, but it will take some time. It's like a patient in need of surgery. His health declined precipitously, he had surgery, it was successful (at least for now), his vital signs recovered, but there is still a risk of infection and full recovery is still quite far away. And older investors do not benefit from a long horizon. Many are depending on their savings and investments for current "life support." Their financial life, what it represents. how long will it take your money, just got a lot shorter.
At the time of loss, it is instructive to remember Elizabeth Kubler-Ross grief cycle. "Initially, most people enter a state of paralysis, not knowing what to feel or not. Classically, this phase is followed by denial, anger, bargaining and depression until finally, accept the new reality. Of course, nobody actually moving successively through these stages. They are more like a cycle, and thus we tend to both accept and reject, a bargain and I feel paralyzed by the repeated, often overlapping moods. However, when we accepted that our circumstances have changed forever and that is now our job to deal with new realities, we can begin to rationally analyze our current situation.
So, once you have gotten to accept, what will you do first? Counter-intuitively, you should start seeking advice from financial journals and to develop new financial strategies. Such a radical change requires a new way of thinking, re-evaluating their lives in order to determine what is truly important to you, and what is not. "All of the above" is no longer an option.
Your goal is to create a psychological base about themselves, studying how and when you proceed to give you the confidence and momentum to address your future. Start by remembering two or three situations in which you were performing at your best, you were using all their talents and so involved in what you did to lose all sense of time. Where were you? What did you do? Who were you with? Are you directing effort, or you were part of a team responding to the challenge? Or are you unique addressing and solving problems?
These "memory exercises" will give you important insights about what psychologists call your "motivational needs." From these memories, you can also deconstruct what your interests are and your style of pursuing them. If you want to go deeper, you can use and in-depth "personality profile," such as Birkman Method.
Now you have great information to help you understand what you want to do in retirement. How do you re-create his previous "flow" experience? It may not necessarily be related to the work context. But it would help if some of them can be done in a way that will result in additional revenue. Any additional income will reduce the amount of money you need to withdraw from your retirement accounts. Studies have shown that working only 30% in the first five years after retirement will result in a portfolio that is 40% higher at the end of that period.
The next step is to develop a new strategy for their retirement. Championship of those things that are most important to you. Develop for themselves "new life plan" which would include those things that will make you happy and fulfilled. Include details of your new life. Where will you be living? What will you do? Who will you be doing it with?
Finally it is time to consider the financial implications of their new life. Having made your plan, you must now assess how much it will cost. Use past records to determine your anticipated spending patterns (bank accounts, credit card statements, ATM cash dispensers, etc.). Create a monthly budget, and then convert it to a year, and add in any anticipated major extraordinary expenses (vacations, property / income tax, new car, new roof, etc.). Do not forget health care costs and a reserve for unexpected contingencies. When you have a best estimate of its annual budget, divide by 12 to convert it back to the monthly average.
Now look at where your income will come from to support your monthly retirement lifestyle. Traditional sources include social security, pensions, non-retirement investments, 4% annual withdrawals from your retirement accounts, and all work-related income from part-time job, hobbies, etc. If, as expected, your income projections do not meet your needs, go to your new life plan, and memory exercises and determine what is truly important to you, and what is not. Again a strategy to make its revenues and expenditures in balance. This will put you on good footing for the future.
If the markets come back faster than anticipated, you can always adjust their lifestyles accordingly. However, living within your means is important, so you do not deplete your resources too soon. You do not want to be your friends, saying: "The operation was successful but the patient died ."
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