A slightly different format this week. I’ve been reading investment articles, and I thought I’d highlight the parts that interested me. Here is a striking chart from a great article I got from Blackrock. The important lesson here is that very few of our clients actually have the classic 60/40 portfolio. And this chart kind of explains why.  With interest rates down around zero for the next year or two, the yield on bonds isn’t going to be anything to brag about. Our Yield model, which would benefit greatly from 14% yield in Treasury bonds, is heavy in dividend paying stocks.

There is still a place for bonds in the portfolio. They are a useful “insurance policy” when the market gets flustered.

This is a blog I’ve wanted to have for a while now. The chart above shows average returns for various asset classes over a period of time. As you can see, the longer the time frame, the smaller the columns get. This means the range of returns narrows.

Here’s where it matters to us. Part of our job is helping clients make decisions about how to invest their money in order to reach their goals. An early conversation about investing will often include a discussion about “the market” and the potential direction of a particular part of that market. This conversation is heavily influenced by the left side of the chart. That’s where the financial press finds stories. If there is volatility in the returns, that means there may be a way to turn that into a story, “Stock A has unexpectedly gone down, or up. Stock B has done the opposite!” That’s where the drama comes from.

The Story

Charles and Lisa had been clients for years. We had an exemplary advisor/client relationship: open, clear, and regular communication, and mutual trust. We had long maintained a plan that everyone had confidence in when we suggested taking part in a new exercise.  

As trusted stewards of others’ money, we prioritize regularly participating in professional development opportunities. We had recently completed a refresher on the Financial Life Planning program. Our relationship with Charles and Lisa pre-dated this approach, so although we felt we knew them thoroughly, we knew that going back to basics could only strengthen their financial plan. They agreed.

The Story
Ginger has always been good at being thrifty. It’s who she is. Though she had significant sources of income and had saved well, it was challenging for her to feel confident that her savings were sufficient to live on for the rest of her life. This is true for a lot of people: it is difficult to interpret the implications on day-to-day life by looking at one lump sum of one’s worth.
Ginger came to us wanting to know that what she had meticulously saved throughout her life would simply be enough.

The Story
Bill and Mary have both led full, successful careers. Their combined salaries support a high standard of living. They consistently contribute to retirement accounts and have assumed that this is enough to carry their standard of living through retirement. When the couple began discussing retirement, they assessed their accounts. The money seemed like a healthy amount. But for a second opinion, they sought our professional advice. When we translated the sum of savings to a monthly budget, Bill and Mary were stunned. The monthly amount was not nearly what they’d thought it’d be.

The Story
We met Steve when he was in his late 50’s. He had worked as an engineer for all of his life, and he was starting to think about the next chapter. With an excellent pension and an IRA, he knew he was set for a secure retirement – five to seven years in the future. But Steve was ready to
make that future his reality much sooner. We became his partner in figuring out how to help Steve retire on his terms.

The Story
Paul is an attorney. That is who he has always been – it is how he, and those around him, have defined his identity. Throughout his career, he’s put in the long nights and extra miles. Eagerly. He loves what he does; he loves the craft of it. Now approaching the next decade of his life, things are changing. He and his wife, Lucille, began asking: What does retirement for us look like?

Retirement marks significant life change. For generations, the expectation for turning the page to this chapter of life has been this: after working nine-to-five until your mid-60’s, you stop and spend the next 8 to 10 years winding down. This trajectory accounts for a lifespan of about 72 years and one career-long, full-time job. A few decades ago, that trajectory made sense, mathematically. Life expectancy was about 72, and people tended to hold the same job and contribute to the same pension for their whole career. But now, we are living longer. We are working differently. The way we retire must change, too.