Money Matters (October 2016)
By Chuck Dudley
MAYBE HAVING ALL DRIVERS IS NOT GOOD
In the past year, Met Life Insurance aired a pretty funny ad about golf.
One of the golfers was bragging about the variety of drivers he had in his bag. And all he had were drivers, no irons or a putter. If you know anything about the golf industry, you know that every year or so Taylormade, Titlest and most of the club manufacturers come out with ‘the newest and best driver ever!!’
One for hitting a draw. Another for hitting a fade. One has gizmos to change the angle of the shot. One had a massive head so you will not miss the ‘sweet spot’.
Except, that is not how golf is played.
Having a lot of cool drivers might get you noticed, and bragging at the local country club is a time honored art.
But you still have to hit that second shot. Chipping and hitting sand shots can save you lots of strokes.
And using the putter to put the ball in the cup is paramount. Most should really practice on putting as most strokes are lost on the green.
MAYBE HAVING ALL YOUR RETIREMENT ASSETS IN THE SAME ASSET IS NOT GOOD
Much like the golfer in the ad, when looking at retirement it’s important to have some diversity in your assets.
Not just in your security assets but in your asset types.
When evaluating each asset, it’s important to recognize the risk and reward associated with each.
Risks include market risk, interest rate risk, inflation risk and credit risk.
These days, Social Security has political risks. Especially for the 20-40 year old age range.
Then we have health risk and the cost of extended health care.
Most importantly, is longevity risk. None of us knows how long we will live and in what state of health. Yes, medicine is working wonders. But the most important part of longevity is quality of life.
We don’t want to run out of money.
WE ALL SHOULD HAVE SOME ‘LUC’ IN OUR ‘BAG
LUC stands for Liquidity, Use and Control.
‘Luck’ on a golf course is needed sometimes when you hit that errant shot.
LUC in financial planning is imperative if you are going to have a well rounded, complete retirement plan. As in golf, things don’t always turn out like we want them to. We have to scramble to make a par or a bogey to save the round.
Much like a farmer hedges his crops, a retiree must look to hedge his retirement plan. When the risks of certain assets overcome the rewards, having an asset you can draw from that does not have the same characteristics is just smart.
It would be similar to using a 3 wood off the tee, instead of a driver. Use the safe club, get yourself into the fairway, and continue to play the hole properly.
Retirement planning is the act of turning accumulated assets into cash flow at distribution time.
Wouldn’t having different characteristic assets make a lot of sense?
It makes a lot more sense than having a golf bag full of drivers.
If you really want to make sure you have right ideas for moving forward in a positive manner, we will listen. We’ve been able to help families and businesses learn to use money wisely, and we’d like to help you too. We would be honored to visit with you about how to help you and your business. My number is 501-318-0010, or you can send me an email at firstname.lastname@example.org.
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