Market Returns Are Variable
As you can see, market returns are not like returns from CDs. Although bank yields are usually much lower than stocks, they are more predictable— that is, less variable. The market, because it is uncertain, can be said to be risky. Here risk is not the same as the risk of losing all your money or seeing sizable market correction. It means something far subtler: the unpredictability of year-to-year returns. Often people approach retirement investing with the narrow perception of the recent past. But bias will often hamper investment judgments. You want an unbiased advisor, someone who does not get fooled by past performance.
When you look from afar at Giant Mountain in the Adirondacks in upstate New York, you see the tree-covered slope gradually rising to the top.
But just try to walk the trail. The high boulders and deep crevices make for a long and arduous hike that is not linear. So it is with the market, and so it is with life. You may see several recessions during your golden years. You may go in and out of different careers or jobs after your primary job is terminated. You may not work at all. Many people have completed the twenty or thirty years required by an employer to qualify for a pension check, while others have been through ten different employers, accumulating several 401(k)s or TSAs. You may have the vigor after sixty to have a more active life than while you were working, or you may be disabled. In either case, the meaning of retirement is changing for most of us.
It is not clear how these changes will affect the social order, but government and academia are studying these matters. Will long-lived people put stress on our Social Security system? Will people need career counseling at age eighty-three? For those who welcome challenges, life will be more exciting—for example, acquiring new skills and jobs. We must be aware of the forthcoming challenges. If a happy and successful retirement is important to you, read on. Whether you are transitioning to retirement or have just retired, you need to be mindful of important factors and issues that will help you to discern the most dependable plan for your lifestyle.
