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This past summer we went on a camping trip in Voyageurs National Park. It was only a two night trip. We had several means of cleaning lake water so it was safe to drink. But we brought a large bladder of water and 5-gallons of tap water from home, just for comfort. We canoed in and camped for two nights. Even after the two nights and hours of canoeing we still had half of the 5-gallons of tap water left. That last morning before we packed out, we were generous with the water we used for drinking and cleaning. The end of our trip was near and we’d soon be around tap water, again, anyway. The current retired generation tends to have the “Camping with Tap Water,” mentality. According to “Annuitization Puzzles”, Journal of Economic Perspectives, this fear of running out can lead to not spending enough on yourself! This can be due to trying to save enough for your late retirement years when you need more for healthcare or because there’s a strong desire to leave a legacy with forthcoming generations (Benartzi, Previtero, and Thaler, 2011). Perhaps you have senior parents who have amassed good relative wealth? Yet you can’t coach them to spend much on themselves. The habits that help you develop wealth likely follow you into retirement. It’s this concept that I share with my clients. Then of course there’s the virtue of moderation. Funny how some of the same habits like persistent saving & prudent spending suddenly become a problem when you retire, huh? Retirement Foreshadowing The story of our camping trip to Voyageurs National Park is likely foreshadowing for me. It helps me realize some traits about ourselves. Its a fun analogy for me because I’ve used the image with clients. It’s the idea of filling a giant water balloon up with water – saving for retirement. Then the game changes in retirement. All of the sudden we’re left to determine where to place a pinprick in that balloon so that water flows for you to live off of. It’s an intimidating concept. Have you ever poked a hole in a balloon accidentally? It pops! In the case of a water balloon, the water bursts out. All you’re left with are the remnants of a balloon. Investment & insurance companies have caught on. Have you noticed your employers 401(k) statement describing how much income you might expect when you retire? (Observe the disclaimers!) This is in part because of folks studying what should guide your decisions and behavior as you prepare for retirement. So maybe it’s worth another look at positioning your assets within your retirement portfolio so that we can strive to secure lifelong income from it? Dear Clients, I think its also important to bring this thought into social security claims. When is it the right time to claim social security? We don’t need to reinvent the wheel. We need to acknowledge potential challenges and select reasonably reliable solutions. Living in retirement brings many changes. It’s natural to wonder what it will be like. After a long road I wish for you to feel well informed and financially prepared. Camping and water analogies aside, retirement is a life to look forward to. Don’t strive to reinvent the wheel. Strive for a comfortable retirement by becoming an informed investor. *** Benartzi, Previtero, and Thaler. “Annuitization Puzzles.” Journal of Economic Perspectives. Fall 2011. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.