The ‘Old Normal’ Will Slaughter Your Retirement If You Don’t Adapt

My parents and grandparents, more so with the latter of course, imbued me with a deep respect and understanding of the economic/financial ‘normal’ which permeated their lives. Even when some of the paradigm shifts radically changed the landscape, post WWII, their mindset for the most part wavered not an inch. I’ll confess to being the typical Boomer, in that my early adult years demonstrated a combination of ignorance and a certain self assuredness not supported by either empirical evidence or personal experience.

Put more succinctly, I was the typical 20-something know-it-all whose real life lack of experience, expertise, and knowledge was nearly immeasurable.

Then several ‘storms’ converged to enlighten me.

The starry-eyed optimism and unearned confidence of my early adult life was both a help and a hindrance. It helped as I forged ahead in things only a lack of fear made possible. It hindered cuz, well, ignorance and arrogance always hinder. Duh. So what were these storms?

I embarked upon an intense and extended period of education. The teachers were, with rare exception, not ivory tower professors. They were doing what I was doing — and with excellence.

I became a father — that should be self explanatory.

The disastrous inflation/recession of the early 80′s hit HARD and taught exceedingly well.

Grandma explained what she’d been tellin’ me for years — that the fundamentals, physics if you will, of economics would not be long mocked.

I learned a priceless lesson: ‘Adapt or perish’ wasn’t just a slogan.

In my experience, the principle of adaptation has two basic levels. 1) We must adapt to market changes, often temporary in duration, or if not, they’re generally not soul-wrenching events. (Captain Obvious now rollin’ his eyes.) 2) We must adapt to huge changes, often systemic in nature, that will make previously profitable strategies and/or endeavors disappear faster than steam.

An example of #1 would be temporary but problematic interest rate increases, or minor but irritating modifications of a particular tax law. An example of #2 might be TEFRA, an act passed by congress in 1986 which threw wrenches in all sorts of real estate investment strategies. It causes much grief and chaos in the years immediately following its passage. It decimated limited partnerships, a very popular investment vehicle of the time. Many said it took away much of what ERTA gave a couple years earlier.

If you’re over 40, and especially over 50, the big picture as it relates to your retirement income is now more important than ever. Specifically, that means the real estate goddess of forgiveness, appreciation, has been banished for the foreseeable future. Without the reasonable expectation of properties consistently moving up the value escalator, the real estate investor’s expertise and knowledge will be tested. Mistakes will now be punished — solid investing will be rewarded.

The ability for you to adapt to all the changes that have rained down on us in the midst of this perfect storm will, more likely than not, make or break the quality of your retirement. Those who’ve lost so much on Wall Street are acutely aware of this principle and how it will affect their future.

Be bold, but Plan — then do things on Purpose.

This is where Self-Directed IRAs, Solo 401Ks, and Roth IRAs come into play for so many of you. Best case scenario for many is a number of years on the treadmill playing catchup — making up for all the money lost. Be strong, and take heart — then make the decision to be an adapter. It could be the difference between the retirement for which you planned, and 10 more years on the job.

We’re not in Kansas any more, Toto — it’s back to the Old Normal.

Frankly, I’m thrilled the Old Normal has made a comeback. It’s the silver lining to all these storm clouds. Those who make Purposeful Planning the foundation for their retirement will reap the benefits. The next five years will see the amateurs left by the side of the road. Appreciation, the goddess of forgiveness has left the building.

Let’s talk. Contact me at 619 889-7100. Have a good one.