Longevity

While no one knows how long they are likely to live, the average life expectancy of Americans has been increasing for years. Today, a healthy married couple, each aged 65, has a 25% chance of one of them living to be 95. Take a look around your community and see how many people are celebrating their 90^th, 95^th, or even 100^th birthday. Planning for a long retirement is critically important.

“It is not the strongest species that survive, nor the most intelligent, but the most responsive to change.”

– Charles Darwin

Inflation

Inflation is the silent killer of long term investment plans. With an annual inflation rate of 3% (the long-term average 1913-2018), the purchasing power of your assets is constantly decreasing. Think back to what your first new car, your first house, a gallon of milk, or even a postage stamp cost 30 years ago. Returns in excess of inflation are the key to maintaining and increasing your purchasing power over time.

Sequencing

History has shown that the stock market has provided the best returns of any asset class over history.  The problem is that these returns don’t come in a straight line and are accompanying by short term periods that are downright scary.  Having a plan that recognizes these short term risks is an important component of a successful plan.

“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”

– Warren Buffet

Taxation

Taxes are the largest cost of managing assets. While we are not accountants and don’t pretend to be offering tax advice, it is important that taxes be an important consideration in your plan. Using investment managers that have tax aware processes for your taxable assets is one important facet. Another is understanding how to diversify your assets among the taxable and tax aware options (IRA and Roth accounts) available to you. Uncle Sam isn’t a family member. He won’t forget when you need to start taking Required Minimum Distributions from your accounts.

 “It’s not what you make, it’s what you keep.”

– longtime Nuveen tagline.

Behavior

There is an entire segment of economics, behavioral economics, dedicated to understanding the mistakes that people make when it comes to their money. It is easy to let your emotions run wild during stressful periods in the markets and in your life.

“Fear has a greater grasp on human action than does the impressive weight of historical evidence.”

– Peter L. Bernstein