I live in the White Mountains of New Hampshire. We live for ski season here. This week the ski season ended almost a month earlier than it usually does because of unseasonably warm weather over the last couple weeks. This is on top of the season starting a couple of weeks late. People are pretty bummed here for that reason. But the reality was, other than the shortness of the season, it was good. We got in a lot of skiing this year. My son made major strides in his ability. My wife and I skied many, many days. It’s just that our expectations were not met so it seems bad because last season was a very long season. The big picture is that some seasons are like this, short and sweet. Some are even worse. We are basing our expectations on last season, which was above average in length.

Same about expectations on investing for retirement.

Some years are really good while others pale in comparison. But, unlike skiing, if you don’t set it up correctly the bad years can really hurt you. Here is what generally happens in bad years. People question their strategies [which is good], and many simply give up and stop what they are doing. This is even more intense when people are invested in instruments that go negative dramatically.

A critical point when thinking about investing for retirement

Somewhere along the way people’s expectations were set that this couldn’t happen. This is, perhaps, the critical point when thinking about investing for retirement. Set your expectations realistically and use strategies that don’t trigger psychological pain in bad years. If you have well placed real estate, then you might suffer some downward movement in your received rent during a recession, might even have some issues with vacancy rates, but this should have been all cooked into the numbers. Same with EIULs.

You might have a couple of years of no-gains, but on the other side you will get good gains. Same with your rentals. As long as you have set your expectations correctly, you will be fine in the long run and not do something dumb. And you made good progress even during recessions, just like my son improved his skiing even during a short season! Sometimes because of your expectations you don’t realize how much progress you really made.

BawldGuy Here: This might be one of Dave’s most valuable posts so far this year. The ups and downs of the national and sometimes local economies come and go like the seasons. That’s exactly why real estate and EIULs are worth their weight in gold. Over the long run, for different reasons, they both yield the results expected by investors. The investment world, like anything else is relative. When compared to the multitude of options from which the investor has to choose, real estate and the EIUL have been kings of the mountain so long, few even know what vehicles are next best.