Why Set It and Forget It Could Wreck Your Retirement Plan

SPEAKER_1 (0:00)

For more on how to prepare your portfolio, let's welcome in Bonnie Treichel, the founder Endeavor Retirement and partner at Endeavor Law. Bonnie, thank you for taking the time to be with us to talk about this important part of positioning.

We often see investors trying to time market moves or when panic and volatility is going to hit, but obviously we also know no one has a crystal ball. You say income planning is not about predicting markets, but instead preparing for them. What does quote unquote preparing look like in practice before the market starts moving?

Bonnie Treichel (0:36)

Yeah, and maybe I'll just start with a little bit of perspective from Morningstar. I think they had a survey over the last couple of years that really had a key finding which is the more investors traded, the worse they performed. I think that's just helpful perspective to think about this issue of when we're starting to plan for predicting markets, that's really about coming up with a plan and not waiting until markets become volatile because what happens when we wait until later is that we let our emotions take over. And so we don't want to engage with the markets in an emotional way. We want to do so in a thoughtful, predictable way. So by waiting until it's too late by not planning ahead, we are letting our emotions take over. And I think we all know that when we do that, if we are working with others on planning, maybe a couple, if we are working with a family, maybe it's with parents or we are even dealing with some estate issues, then in that sort of situation, then again, our emotions take over, that leads to what? Conflict. And again, we don't want to have those emotional takeovers. So instead, we can do things like starting anytime with your first dollar in a 401k, with your first dollar in an IRA, which we know can start at birth with certain types of accounts now. So it's about starting early and thinking about it often, but doing it in a regular routine way as opposed to waiting until the market start to move.

SPEAKER_1 (2:00)

So starting early and thinking about it often just sort of goes against how many people I think about retirement planning, which is this set it and forget it approach. You always hear that when we talk about retirement planning. What do you say to people when you're having conversations with clients who come in and they say, okay, let's just do this and it'll just sit there. And that's not an appropriate approach for this type of environment, right?

Bonnie Treichel (2:24)

Set it and forget it is the idea of do not let your emotions take over and start trading in volatile markets because you're letting your emotions take over. You move everything to cash and just never put it back. That's not what we're going for, right? That's the set it and forget it is don't let your emotions take over. But what I really try to coach people about is to reset on that set it and forget it mindset and think about things. I've called it more of this kind of sketchbook approach. Our lives are always changing. We can't predict markets. We can't predict what might happen in our personal lives. We can't predict if there's a layoff or something in our jobs. It's more about coming up with some good guard rails or framework that we can work within, but you're continually working on that plan.

I always get frustrated with this idea that someone's going to get a financial plan. It's going to get printed out or stuck in a back folder on your desktop that you're never going to look at again. But it's like, great, I got my financial plan and it's done. Well, it's not finished because it's basically out of date the second you get it. It's great for guard rails, but you can't set it and forget it. You really have to be thoughtful about how life might change over time, how markets might change over time, and how you can be planning along the way.

One of the tips that I have for people is thinking about the resources that you have available to you to help you with planning. This can apply for everyone. It can apply for the 25-year-old, the 55-year-old, and the 75-year-old. Perhaps you have a 401k at work. You likely are paying for some financial advisor as a part of that 401k, or maybe it's a CFP, Certified Financial Planner. You likely have some access to resources you don't even realize, but start with just finding out, number one, what resources are available to you, and then number two, engage with those resources and find out how they can help you to start to figure out what is it that you have, what can you do to build income sources, and then how can you continue to monitor those over time? And that can apply for even high net worth individuals as well, because they might be paying for some sort of fees or resources to their financial advisors or family offices that they don't realize as well.