Invest for Retirement Without a Plan? You're on Thin Ice

By Joseph A. Clark

NEW YORK (AdviceIQ) -- To listen to me commenting on the Olympic figure skating in Sochi, youd think I was an expert. But I know very little about it. Tragically, too many investors make decisions whose basis is as thin as my knowledge of skating.

As we watched the Winter Olympics skating competition on TV, I pointed out to my wife a Salchow jump and then a death spiral. She looked at me with surprise and marveled at how much I knew about the sport.

Then she asked my take on the competitors technical score. I confessed that my opinion rested on what I like and hardly qualified me to pass judgment on the entire routine. My meager knowledge came from reading an article about skating maneuvers.

Truth be told, we go through life passing judgment based on many little pieces of information, without truly grasping the context of the entire issue. The blunders in retirement planning are legion, resting on such misperceptions.

Unlike the few minutes Olympians get to perform, your retirement plan must last as long as you do. In fact, there should be some resources left after you are gone. The skaters scores confuse me, even though I can watch the entire routine. So imagine how challenging it can be to determine if an investors retirement performance is successful. 

You first need to define investing success, much like an Olympic athlete quests for a medal. For most of us, the proper definition has nothing to do with the return on an individual investment or even your portfolio over a single year. Success comes from your money lasting longer than you do while allowing you to maintain the lifestyle you enjoy.

The focus has to be multi-faceted. You must pay attention to the amount you save. Often, people save only the minimum amount needed to gain an employers 401(k) match. Odds are that it is too low to meet their goals. Plus, they may choose poorly in their investment tools perhaps putting the bulk of their 401(k) into a low-returning money market fund because they think it is safe. Too bad that it wont grow to meet their needs or keep up with inflation.

Trouble finds you if you follow an emotional investing style, try achieve illusory safety or chase ambiguous market returns and perceived ideal market averages. Rather, a disciplined approach that provides a return in calm and choppy markets has a far better chance of getting you to the retirement you imagine.

Many investors take the tax landscape for granted without understanding the fluid nature of the tax code, and make necessary corrections. Look at snowboarder Shaun White, who lost his bid for a third Olympic gold medal in the halfpipe, a sloping U-shaped course where the athletes show off aerial maneuvers. White had trouble with the walls, which were more vertical than he was used to, and the bumpy surface. He finished fourth.

While these conditions were outside his control, he also failed to make adjustments. By ignoring changing conditions and hoping for the normal outcome, many investors end up with retirement surprises they could do without. What if you misjudge the effect of the new 3.8% tax charge on investment income for couples with more than $250,000, mistakenly thinking it doesnt apply to you? That spells problems with the Internal Revenue Service.

There are many art forms in the world. We watch the Olympians and cheer for their success and safety. It's an advisers' job to watch over the families they serve with the same competency, clarity and communication they use in their own finances. It's an investors job to envision goals and use all the intelligence and flexibility they can muster to achieve them.

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-- Joseph "Big Joe" Clark, CFP, is managing partner of Financial Enhancement Group, an SEC-registered investment advisory firm in Indiana. He teaches financial planning at Purdue University and is the host of "Consider This with Big Joe Clark," found on WQME and iTunes. He is a registered principal offering securities and registered investment advisory services through World Equity Group, member FINRA/SIPC. Big Joe can be reached at, or (765) 640-1524. Follow him on Twitter at @Big Joe Clark and on Facebook at here.

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