Source: Crown & Caliber Blog
In 1992, I was lucky enough to be referred to a wonderful and fun 62-year-old lady named Ellen. She had been employed by a local manufacturing company for nearly 30 years, and she wanted to know if she had enough in the way of financial resources to retire. Her boss had been a client of mine for several years at that point. Remember in 1992, I was only 27 years old, and I had been a financial advisor for five years. As hard as it may be for some of you to believe, I actually still had a little bit of hair back then.
Ellen lived a relatively conservative and debt-free lifestyle. She had a modest home in Northeast Ohio, which was paid for. She was going to be receiving Social Security benefits and a monthly pension (remember those?). She had approximately $150,000 in her employer’s 401(k) plan that she wanted to roll over to an IRA. She asked if we could help her invest this money so that she could supplement her income each month. These combined income resources would allow her to live comfortably in her retirement years.
As many of you may recall, the 90’s were a pretty good decade for the economy, and for investing in the financial markets. Although there were periods of volatility, we were living through the explosive returns of the dot.com bubble. During this time, the stock market rose dramatically, as you can see below.
From 1992 through 2000, Ellen faithfully took a $1,000 per month withdrawal from her initial investment of $150,000. This equated to a very aggressive 8% initial withdrawal rate. This means that she took withdrawals of approximately $100,000 over those eight years. At the same time, Ellen’s account value grew to more than $220,000.
In early 2001, I was meeting with Ellen and we were reviewing her cashflow needs and investment account. I was talking about portfolio construction, the efficient frontier, correlation coefficients, and the standard deviation of her account. I felt very good about being able to help Ellen do the things that gave her life meaning during her retirement years. I was also feeling very satisfied that my professional abilities had allowed her to achieve these life goals.
It was at this moment that Ellen firmly reminded me of something very important from the client’s side of the table. She looked at me and very plainly said, “Jesse, do you know what’s really important to me?” She then explained that what was important to her was that if she got her Social Security check, her pension check, and her $1000 monthly withdrawal from her account, she could do what she wanted in life.
She said that she knew that what I was talking about was important and that she was comfortable and confident that I knew what I was doing professionally to help her. However, most of what I had been babbling on about, was just noise to her. She just wanted to make sure she had the income she needed each month.
I recently had a client say something similar to me in a much less blunt way. During our recent meeting, they said they knew that I was very well-versed in economic and investment history, and I loved talking about what was happening in today’s world. However, they said that as much as I enjoyed talking about how the watch works, they just wanted to know what time it was.
The Certified Financial Planners of Impel Wealth Management spend an enormous amount of time being students of the business. We want to be confident in helping guide you, our trusted friends and clients, through the news and noise of the day to help you use your hard-earned resources to do the things that give you joy and happiness in life.
This sometimes leads us into detailed and intricate conversations about the economy, the markets, and the geopolitical backdrop. For those clients who want to know how the watch works, and you know who you are, we will enjoy doing a deep dive into these topics. For the rest of you, we will do our best to focus on telling you what time it is. We want to help you best utilize your resources to help you and your loved ones continue “Moving Life Forward”.
© 2023 Jesse Hurst
The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.