From Retirement Now Newsletter December 16th, 2021.

Everyone knows about Santa Claus.

But the lesser known evil version of Santa is a demon called Krampus, who would haul the bad boys and girls off to hell if they weren’t good for the year.

And you thought the threat of Santa giving a lump of coal was a motivator for good behavior.

But Krampus can come after your retirement as well and may even try to drag it down to the pit, especially to those that misbehave doing some of the following:

Market timing – This is trying to predict where markets will go in the short-term and then making some trades either into or out of the market before the movement happens. More often than not this will be a mistake as markets are quite unpredictable. But sometimes luck is on the market-timers side, which actually only reinforces this type of bad behavior by leading to an unfounded over confidence in stock picking ability. And Krampus loves the overconfident.

Investing like you are still working – Investing can change for people as they approach and enter retirement. Whereas during their working years they are living off their wages. When you retire you will probably have some portion of your budget funded with withdrawals from your portfolio. But if you are still investing the same way as during your working years, i.e. overly aggressive, Krampus may find you in a position to have to sell stocks at low prices just to meet your retirement budget. To keep Krampus off your back during retirement, consider using less volatile asset allocation, to help you have some assets you can withdraw from that haven’t temporarily gone down in the market.

Not having any idea what your monthly spending looks like now or in retirement. Sometimes you’ll hear people talk about their “number” or how much they need to have saved to retire. Truth is there’s no right answer for everybody on that because it’s largely dependent on how much you spend each month. The more you spend the more you will need saved up to fund your retirement. Which is why it’s so important to have an idea of what your spending needs in retirement are.

Not having a will in place. Admittedly, Krampus won’t drag you to hell over this one, but he may make your kids go through it. But a will is not the only document to have. A power of attorney is also important.

Having no plan on when to decrease withdrawals from your portfolio. One of the biggest threats to a retirement portfolio is sequence of returns risk, which is the risk that in the early years of your retirement if your portfolio performs very poorly it could increase the likelihood of running out of money during retirement. To help counter this, have a plan in place that tells you when you need to cut back on withdrawals should your portfolio cross a certain dollar amount. Otherwise you may be selling more securities at lower prices, and those securities (being now sold) would not be around to experience any market rebounds that may occur in the future. Krampus loves finding the naughty boys and girls that do not heed this warning.

That should do it for today, although there are plenty of other bad things that can be done to a retirement.

If you need help with your retirement or simply fending off Krampus, feel free to hop on my calendar for a 15 minute chat.