Why Emotional Discipline Is a Vital Retirement Asset
In a way, my four previous blog posts about coping with volatility in retirement were about pre-work:
The choices you and your advisor make that don’t always show up on a spreadsheet.
Why maintaining flexibility can be more important than optimizing your numbers.
How to make high-consequence decisions when there is no one right answer.
And some of the nuts and bolts mechanics that prepare a retirement plan to absorb life’s inevitable shocks.
But once you do retire, your plan is only half of the equation.
The other half is you.
And that's because, with a comprehensive financial plan in place, the real risk to your long-term security in retirement usually isn’t market volatility.
It's how you respond to that volatility in the moment.
Volatility Is the Environment, Not the Exception
Many investors believe that a "good" market is a "calm" market that's either holding steady or making good upward progress.
When the markets dip, even a percent or two, these investors see flashing yellow lights: "Something is wrong that needs to be fixed. "
And when those drops are bigger, the flashing lights turn red.
The most successful investors tend to be folks who, over the course of their working lives, come to understand that volatility in the markets isn't a glitch in the system. It's part of the system itself.
Markets will always fluctuate. Even if you examine a "good" year with a typical 10% return on investment, zoom in on a specific month, week, or day and you'll see prices jumping up and down as investors react to hurricanes, a new technology, or something the president said last night.
Without that volatility – without those ups and downs – investing would have no advantage over the low, steady interest rates of a typical savings account. According to market history, dealing with short-term temporary declines is just the price of admission all investors pay on their way to long-term gains.
Why Volatility Hits Harder in Retirement
Of course, it's a lot easier to be confident in the market's long-term upward trajectory when you're still earning a paycheck every month.
A salary provides the extra financial and emotional cushion many investors need to stay the course when times are turbulent.
Retirement takes away that cushion. Instead of building your nest egg, you're now living off it. Your portfolio isn't just funding your future, it's providing for your present. And when those accounts are down, withdrawing from them to pay your monthly bills or take a vacation can feel scary, even wrong.
And those feelings can lead to some costly, reactionary decisions.
Selling investments during a downturn might feel like the best way to avoid more losses and give your nest egg some extra padding. But all you're really doing is locking in losses that, according to market history, you'd almost certainly recoup when the markets rebound. And by selling low, you’re also locking yourself out of those future gains.
Putting off a home renovation or replacing furniture might seem prudent when your portfolio is a little lower than expected. But what if that creaky staircase leads to a slip and fall? What if sleeping on that old mattress for another year adds irreversible wear and tear to your body?
Delaying a bucket-list vacation during a downturn might seem responsible. But what if, when the "right time" rolls around again, you or your spouse aren't well enough to truly enjoy that trip as much as you would right now?
What if one of you isn't around at all?
Emotional Discipline Is a Strategy
It's not really market volatility that causes seniors to make these kinds of decisions.
It's fear.
Fear of permanent losses.
Fear of running out of money.
Fear of not being able to support themselves during the later stages of retirement.
Fear of becoming a burden to loved ones.
That's why I believe that emotional discipline is as important to your investment strategy as accounts, amounts, and allocations.
But having emotional discipline doesn't mean that you just "tough it out" when the markets are rocky.
It means you stay consistent.
It means making measured adjustments when necessary, not unnecessary moves when you're worried.
For example, you and your advisor might talk about your personal risk tolerance in the context of your other retirement goals. You might decide that a drop not exceeding X% is a "buy low" opportunity for rebalancing, diversification, and reinvestment.
Having emotional discipline means that when you see a scary "Market in Freefall!" headline, but the actual drop is that X% you talked about, you don't react to the headline by selling investments and canceling your cruise.
You follow through on the plan. You make the agreed-upon adjustments that will help you take advantage of short-term volatility and keep growing your long-term wealth.
Stability Is Built, Not Found
If you're looking to the markets, the government, the Federal Reserve, or the wider world for financial stability, well, you're never going to find it.
True financial stability is built day by day, dollar earned by dollar earned, decision by decision, from the moment you start working until you clock out for the very last time.
Working with Keen Wealth can help you build a structure you're confident in that maintains the flexibility and contingency you'll need to keep your plan and life in sync throughout retirement.
And when the road ahead looks uncertain, Keen Wealth will be there to help you make disciplined decisions that keep you in control of your financial future.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information, please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.
20260429-5442928-17165720