YOLO!  Or YULIR? (You Underestimate Longevity In Retirement)

YOLO! Or YULIR? (You Underestimate Longevity In Retirement)

October 27, 2023

Ok, that is not nearly as catchy as the Millenial/ Gen Z phrase meaning “You only live once” so I’m open to suggestions. 

Numbers today show the U.S. economy has continued to grow in the third quarter of 2023, despite higher interest rates meant to slow things down.  The stock markets have digested company earnings reports over the last few days; a “good news is bad news” reaction signaling that more work may need to be done to bring down inflation.

A few things are going on here that might not be clear- interest rates are driving market volatility.  Higher interest rates can make stock values decline as a technical matter, divorced from the fundamental value of those companies. 

Fixed income securities like bonds have been in their own bear market, not looking so hot to the market compared to current 5% options.  A glut of new treasury securities has come on the market to fund new debt, and mismatch of supply and demand is keeping the prices low.

What needs to happen in order for things to turn over and begin a new cycle?  Inflation needs to come down, and other signals of a slowdown.  The “soft landing” is still a real possibility and we should remember that recession is part of a normal economic cycle and shouldn’t necessarily be equated with the 2008-09 experience. 

Other than seeing layoffs or other signs of economic slowdown, normally recessions are only positively ID’d in the rearview mirror.  The equity markets historically hit a turning point during the recession cycle, and are followed by positive returns.  Just like the interest rate story there won’t be an “all clear” flag waving so we just have to be patient.

One of the reasons prices have stayed so high for so long is what the Fed and media have called “revenge spending.”  How many folks realized during lockdown and quarantines that life is short- and YOLO- you only live once?

Counseling retirees to postpone a cruise or other large expenses until the markets resume an upward trend sounds extra cruel after the long periods they spent separated from friends, family, and their dreams.  However, while I can certainly be sympathetic and understanding, the nest egg of assets being squeezed for unnecessary spending while everything is down from the 2021 highs may not be as forgiving.

Remember- we use the withdrawal rate of 4% annually to account for good and bad years in markets.  The lower that percentage, the greater the odds that you will not deplete your assets in retirement.  Forced deprivation created a new resolve to live each day to the fullest, spend as much time with loved ones as we can, and never miss an opportunity that may not come around again. 

However, please balance that with flexibility.  While each day could be anyone’s last, we also must plan for longevity.  The older we get, the less equipped we are mentally, physically, and emotionally to face financial challenges. 

The best thing we can do in retirement in this stage of the economic cycle, when markets are not cooperating, is to control what we can control.  Don’t let revenge spending get its revenge on you!

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

Securities and Retirement Plan Consulting Program services offered through LPL Financial, a

Registered Investment Advisor. Member FINRA/SIPC. Investment Advice offered through Western Wealth Management LLC, a Registered Investment Advisor. LPL Financial, Kennebec Wealth Management LLC and Western Wealth Management LLC are separate entities.