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  • Writer's pictureNestor Vargas

Navigating Retirement: Choosing Wisdom Over Hype

As we approach or enjoy our retirement years, it's easy to feel overwhelmed by all the financial advice out there. It's like trying to find your way through a maze. But don't worry, I’m here to help you focus on what really matters.

Remember that prediction on January 2, 2023, about a big economic downturn? Well, it didn't happen. Instead, by December 1, 2023, the stock market, measured by the S&P 500, actually went up by 21.52%. It shows that we can't always take these forecasts at face value.

With the abundance of information nowadays, it’s important to pick the nutritious bits and leave the junk on the table.

Navigating Retirement: Choose Wisdom Over Hype

A Word of Caution for Those Nearing or in Retirement

For those of you close to retirement, or already enjoying it, basing your financial decisions on predictions from media can be risky. It could hurt the comfortable life you've planned for your golden years and the financial gifts you hope to leave for your kids and grandkids.

Sometimes, the news can be more about grabbing your attention than giving solid advice.

The Power of the Right Information

Zig Ziglar, a wise man, once said that what we take in affects our future. With that in mind, let's look at three simple ways to make sure you're getting the right kind of information for your retirement planning.

Intra-Year Decline: Understanding the Bigger Picture

When it comes to your investments, it's not just about the current balance in your account. You need to see the forest for the trees — or in this case, the financial forest for the monetary trees.

Observation vs. Monitoring: A Smarter Way to Manage Your Investments

Ever glanced at your account and either whooped or groaned depending on the balance? This is what I call 'observation', and it can lead to hasty decisions.

Instead, embrace 'monitoring'. Peek at your entire financial landscape and ponder: Have my life or needs shifted? If so, tweak your investments. If not, the smartest move might be to sit tight.

A Helpful Chart to Remember

This chart shows how the stock market has its ups and downs within a year. The red dots show the lowest points, but the grey bars show where things ended up at year's end. Usually, even if there's a drop (about 14% on average), the market often recovers and ends the year positively.

Annual returns and intra-year declines

Key Takeaway

So, the next time you notice a dip in your portfolio, remember you're now using a 'monitoring' approach. This means you're looking at the long-term picture, not just the day-to-day numbers. This shift in perspective can make a big difference in making wise investment choices.

The Impressive Growth of the S&P 500 Over Your Lifetime

Have you ever wondered what would have happened if you had invested in the biggest companies in the U.S. since the day you were born? The S&P 500, which represents these companies, has shown remarkable growth over the years.

A Look at the Growth Rate

On average, these major companies have seen a growth of about 10% each year. For those who may have doubts, here's a practical way to see for yourself: Use this calculator to type in your date of birth and see how much the S&P 500 has returned since your birth date. Prepare to be wowed!

A Real-Life Example

To make this point hit home, I’ll share my own experience. Since I was born, the S&P 500 has had an average return of 11.1%. To put that into perspective, if someone had invested $10,000 in the S&P 500 in January 1985, by now, that investment would be worth over $600,000.

Key Takeaway

This shows how powerful long-term investment can be: By consistently investing in strong companies, like those in the S&P 500, you can significantly grow your savings over time, providing a solid foundation for your financial security in retirement.

S&P 500 return since 1985

Learning from History: How Our Past Shapes Our Financial Outlook

History often holds the key to understanding our present and shaping our future. Harry S. Truman once said, "The only thing new in the world is the history you do not know." This is especially true when it comes to understanding our economy and investments.

The Impact of News on Our Views

News channels often focus on the most dramatic stories, which can make us worried about the future. This fear can color our view of the economy and our own financial plans.

A Real Conversation About the Past

Most baby boomers are nervous about investing because of the current political climate. However, think back to the 1970s, a time of war, political upheaval, and high inflation. Let's compare those times to today, discussing whether you felt our country was in a better or worse position now.

Learning from the Past

Our past experiences, especially during tough times, teach us a lot. Despite many political challenges, our economy has continued to grow and reach new heights.

Key Takeaway

Remember, no matter which political party is in charge, our companies find ways to innovate, reduce costs, and increase profits. History shows us that, through ups and downs, there's a pattern of growth and resilience. The chart below illustrates just how much we've overcome and achieved. 

Long-Term U.S. Stock Returns And Elections

Conclusion: The Power of Wise Choices for a Rewarding Retirement

Understanding the stock market's fluctuations, recognizing the value of long-term investments in stable companies, and learning from historical trends are all crucial for securing a financial future.

With all the information floating around, it's important to choose wisely. Think of it as sorting through a garage sale — there's a lot to sift through, but sometimes you find a true gem.

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Nestor Vargas, CFP®

Nestor Vargas, CFP®

Bienvenido! I own Green Mountain Planning, a commission-free retirement planning firm helping individuals 50 or older retire easily and confidently by reducing their tax bill, optimizing their investments, and creating an easy-to-understand income plan. When I am not geeking out on retirement planning strategies, you can find me at a concert at Red Rocks Amphitheater or traveling with our RV across the country.

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