by Gary Foreman

Your investment plan should cover decades. Are you paying too much attention to what’s in today’s paper? A CFP helps us understand retirement investing time horizons.

Study after study shows that one of the biggest fears retirees have is outliving their money. Yet many of them are so influenced by recent events that they change their plans and shorten their time horizons.

We wanted to find out if that was a good idea or a dangerous one for retirees. So we contacted Mike Miller and asked him about overemphasizing current events in retirement planning. Mr. Miller is a Certified Financial Planner® and founded Miller Premier Investment Planning, LLC in Midlothian Texas.

Q: It’s common for people who are retired or nearing retirement to shorten their time horizons when it comes to their financial planning. Do you think that’s a good idea?

Mr. Miller: With life expectancies increasing along with medical advances, it may be a mistake to shorten time horizons. Today, a 65 year old couple of average health, good habits, and genes has a 50% probability of at least one of them making it to age 92. Add in medical advances and you are easily looking at a 30 year time horizon.

Regular inflation can eat away on a portfolio that is too conservatively managed if this longevity risk is not properly considered. Health care inflation, as you know, is much worse!

Q: Baby boomers have more life experience but still seem to put more emphasis on recent financial events. How can the average person know whether they’re over emphasizing recent money headlines? We know what just happened. We don’t know the future. How can retirees keep from assuming that current events won’t change direction?

Mr. Miller: Everyone can easily be caught up in the moment regardless of their station in life. I believe it is the number one reason why most investors are unsuccessful on their own as indicated by the Dalbar studies and findings. Even the professional managers cannot beat the indexes over time consistently.

So how does someone know when they are falling prey to short term bias? If they find themselves caught up in the news of the day and extrapolate this into a “this is a new world forever” mentality whether it is good or bad.

How do you combat this? Hopefully you have a financial professional you can call and share your current concerns with, as this is the number one job of advisors. Keeping their clients from making “The Big Mistake!” A great advisor will have run a battle tested plan that takes into consideration the worst of markets to determine how a portfolio should be constructed before ever beginning to manage your money.

If you don’t have an advisor, my first advice is to get one. NAPFA and XYPN are great resources.

If you still think you can do it alone, I would encourage you to go back and look at market history and remember all of the bad things that have happened over the years. Then look at the overall advance of the markets. Finding the right balance is key.

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Q: When planning their retirement investment portfolio, what time frame do you encourage clients to use?

Mr. Miller: Much the same as your first question. We look at client health, smoker vs non-smoker, and family history when planning longevity. If a client is retiring in their 60s, it is usually at least 25 years.

Q: How frequently should they plan on revisiting their plans and revising if that’s necessary?

Mr. Miller: Clients should be reviewing their portfolios, plan, and progress annually. We provide a portal that gives our clients daily feedback on their progress and probability of success. However, I do not recommend watching it daily.

If there is a change in their financial circumstances, goals, or anything else that can affect their plan, then they should give their advisor a call. Preferably this call comes before a major financial move and not after.

Q: Is there a common error that’s often made when retirees are considering planning for their financial future?

Mr. Miller: The biggest enemy of every investor is themselves. Our brains are wired to help us survive, but unfortunately those same mechanisms work against us when it comes to investing. Our emotions get in the way and tell us to do something when the market tanks and usually it is to hit the sell button when we should be buying the very thing we are selling. We can look like dogs chasing our tails.

If we don’t have a battle tested plan in place and a great advisor to talk to during these times, we are likely to do the wrong thing. Sometimes doing nothing is the very something we should be doing!

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Reviewed October 2021

About the Author

Gary Foreman is the former owner and editor of the After50Finances.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.