From Retirement Now Newsletter June 3rd 2021

A while back I read a story about a Bitcoin owner who couldn’t access the keys to his wallet that held about 7,000 Bitcoin. And I couldn’t help but see the parallels with his story and what many people worry about when it comes to their retirement.

The total value of that amount of Bitcoin was about $220 million.

Anyway, without the “keys” to his Bitcoin wallet he couldn’t access his Bitcoins.

And the keys to the wallet were stored on a hard drive that was password protected.

And just to up the stakes even more, the hard drive would only allow 10 wrong guesses at the password before it would encrypt its data, making it essentially lost forever.

This is very much like a Tom Cruise Mission Impossible situation, except his hard drive wouldn’t self-destruct.

As far as we know, he’s used up his chances and essentially lost those Bitcoins.

Tough pill to swallow.

And while most people will never have to live with the fact that they lost $220 million on an investment, there is still a similarity between what many retirees fear when it comes to their life savings. Mainly, it’s trying to figure out how to invest and manage and not overspend/overwithdraw from their portfolio so that it will not fully deplete during their retirement.

And there are a lot of different ways to approach trying to solve this problem.

It could involve using lifetime guaranteed income accounts.

Or investing in a diversified portfolio and taking withdrawals.

Or actively reducing/increasing their portfolio withdrawals in response to how the market is doing.

They could also do a combination of the above.

But making the decision on what strategy to use to solve the issue of not running out of money can be difficult. And it can be even more difficult to stick with that strategy. Yes, it can be hard to stay invested after a big market correction even when history has shown that is often times the best decision to make.

One thing to keep in mind, is there is no single right answer for everyone.

It may work for one person to have a balanced 60/40 portfolio and take a steady withdraw from it even when that portfolio is down 20% for the year.

But another person may try that strategy and completely panic when the next market correction occurs, sell at a loss of 20%, miss out on the market rebound, and jump back in to the market again right when it’s about to crash another time. And wreck their whole retirement plan.

That’s why when looking at your retirement, and determining how you will generate enough income from your portfolio to cover your expenses, it’s a good idea to be very honest with yourself about what type of investor you are.

Take a look at your past actions.

How did you react when your portfolio was down and everyone was panicking? Would you act differently in retirement, after your regular salary has gone away? What amount do you feel comfortable withdrawing from your portfolio? Is that sustainable? Would you feel more comfortable with some guaranteed income sources that are not dependent on the market? Would you rather not have guaranteed income sources, and instead rely only on the market?

Conclusion: These questions are good starting points when pulling all the pieces together of your retirement plan. And if you’re frustrated with trying to figure out if your retirement is on the right track, click here to have a 15 minute phone chat with me and we’ll see if we can point you in the right direction.


Chris Hammond