There is a conversation that I keep having with people who are nearing retirement. It goes something like this: “Don, what do you think of the market over the next few years, because I only have 5 years left”. My first thought is, “Oh no, they have a terminal illness”. Then on further inquiry I find that they have 5 years left until retirement.
And so I ask them okay, what’s going to happen in 5 years? What are you going to be doing with your money that’s so different from today? And inevitably they act as if I asked them what they’d do if the sky suddenly turned green. They have no idea how to think about the question much less answer it.
Many people haven’t done two important things. First, considered what they will do when they retire. How will they live their lives? In America, so many of us are defined by our work. What will we do when it’s gone? I have a friend of mine who is 50 and is retiring. He is a Type ‘A’ personality. When I asked him what his plans were, he was pretty vague. He’s got another maybe 40 years to go and he hasn’t a clue what he’s going to do. You can only finally paint the basement once. Then what?
The other problem is people don’t consider how their investing will change, or actually not change. Yes they’ll need income in retirement. But especially early, they’ll still need lots of growth. For most people that will means stocks and/or stock mutual funds. But people I talk to act like the day they turn 65 the money all goes under a mattress. The change in retirement investing is a gradual process, slowly shifting more toward income, less toward growth.
Even for people who are 60 and retiring soon, the question of what will happen in the market the next few years is irrelevant. As long as your stocks are higher 10 or 15 years from now, it’s all that counts. If you’re 50 or 60 and haven’t thought about it, do so. Consider how you will live and how you will invest. And don’t start thinking “I only have 5 years”. The best is yet to come.