The Secret to a Stable Retirement

A co-worker once told me that the key to a happy relationship is “The Big C”. “Commitment?” I asked. “No Kristina. Compromise.” She replied as she laughed at me. I guess the secret to the way you can retire as a couple in a stable marriage is the same way that you can retire financially stable…you compromise.

I can’t even convince my boyfriend Nick to get married to me now, let alone plan ahead into the future. Yes I know that we have been together for ten years, and that in itself should be commitment enough for me. But, together for the past ten years is not the lifelong commitment into the future that I feel I deserve. This is the one subject that I am not willing compromise on.

Over the last ten years I have learned that compromise is in fact the main secret to a happy and sustainable relationship. Of course the willingness to adjust and having good communication are also key factors. The exact same philosophy can be said about stable finances.

Compromise? How can you compromise your finances and investments? You have to keep your focus on your goal. If retirement is your goal and you are in your 30s and 40s then your focus should be on the long term. Just like any personal relationship, you have to keep in mind that your relationship with your finances may be rocky in the short term, but it will all be worth it in the long term.  This is especially true with equity investments such as growth mutual funds and stocks.  The potential losses in the short term can be big, but so can the potential gains over the long term.  People who invest in equity want to make money. Everyone is happy in a bullish market when they are making money. Those exact same people complain in a bear market when they are losing money.

When the market gets rough, don’t panic and don’t walk away from your investment portfolios. I mean, don’t sell your investments when you are losing money. Often people get scared when they see a negative change in the value of their portfolio, and they “park” their funds in cash until the market begins to recover.  This is exactly the opposite of what you should do. Hang in there until the situation smoothes over because it will get better.  Seriously, you should want to lock in gains…not losses. For the moment your loss is only “on paper” meaning that you haven’t realized it yet.  However, once you sell those investments you actually take the loss.

We need to be able and willing to adjust our expectations and goals as markets change.  Just like any relationship we need to be flexible and adapt to change.  If you start investing for retirement at 30 years old it is only normal that your investment portfolio will change over the next 25 to 30 years until retirement. It is rare that people will hold the exact same investments over a 30 period time frame.  Don’t be afraid of changes in your investments. Change is good, and if you ask me…It’s time for change!

Good communication is also a key factor to a profitable investment portfolio and therefore a financially stable retirement. Communicate with your investment advisor.  If you are not happy with a particular investment choice then speak up.  Yes your advisor is the professional but it is your money.  They are there to make suggestions, but in the end you are the client and you make the final decision.  You should be in touch with your investment advisor at least four times a year to review your portfolio.

Communication with your spouse is also very important when planning for retirement.  Your dual income will become dual retirement income and therefore they should complement each other.  You don’t necessarily need to have the same financial advisor, but you should communicate and be open with each other about money, both in the present and for the future.  After all, you did take a vow for richer or poorer until death do you part.