Retirement is Never Urgent Until

If you're like many people, your retirement savings have not been growing consistently over the years. We're not referring to the wild fluctuations in the stock market, but rather the fluctuations in our short-term needs. Every once in a while, it just seems like a good idea to yank ALL those retirement savings out and pay for something.

You might need to pay for a down payment. You might need to pay off some credit card debt that's nagging at you. You might want to 'bugger off to Europe' as Rick did some years ago. You know it's not a good idea financially, but you do it anyway. Retirement savings are not designed to bail us out when we need this kind of short-term cash infusion but if it's there?

As financial advisors, we have our ideals. Ideally, you should put retirement funds away and 'leave it there'. Ideally you should never touch it at all, even when you retire! Why? Because it is the 'earnings' from the nest egg that you should be using, never the principal. As we heard one person suggest recently, your principal is like your 'goose', and you never kill the goose, because then you're eliminating all those future 'golden eggs' (interest/earnings) it will lay.

As financial advisors, one way we try to prevent people from yanking out their retirement savings is by ensuring there are other 'short-term' funds available for emergencies. These are meant to act as a buffer zone against the yankers. It helps, but it doesn't always work.

One problem is that a distant retirement will never be more urgent than the current cash demands you have. It's impossible. How can long-term demands be more urgent than a current crisis? So what stops you from yanking out those retirement funds? Their convictions? Simple arithmetic? A more viable alternative?

When a client is bent on yanking out their retirement savings to pay off, for example, some credit card debt, telling them how much they're going to lose in retirement income in 25 years time doesn't seem to work. Even telling them how much the tax bill is going to be next year can pale in comparison to the relief the person is seeking from the anxiety over their current debt crisis.

So, the question is how can we provide 'relief' and still keep the retirement funds intact? Look at a debt consolidation loan? Review the person's cash flow and create a debt repayment program? Maybe this will work for a minority of people. In the real world, when people are looking for relief, however, they are looking for relief NOW!!! The easiest way is to yank to retirement funds and be done with it.

So, in the moment, when you are in a cash crunch and seemingly have no other place to go, you will yank your retirement savings. Unless you have anticipated the problem and 'pre-decided' that under no circumstances will you access your retirement savings. In this way, you will do a pre-emptive strike on bad financial moves. Further, you will be cognizant of putting yourself into situations where you might risk those long term savings.

The alternative is to invest long-term, make progress, encounter a short-term cash crunch, yank out your retirement funds, survive the problem, invest long-term again, make progress, encounter yet another short-term cash crunch, yank out your retirement funds to get relief?

If you're locked into an investment cycle like this, your retirement savings have not been growing consistently over the years, and it's not just the market.

About The Author

Rick Hoogendoorn has been in the financial services business since 1991. Cheri Crause is a certified financial planner in Victoria, BC.

www.chericrause.com

rick.hoogendoorn@shaw.ca

---

Before You Invest You Must Read This

It is important to answer the following questions before you... Read More

Have You Ever Seen A Map of the World Turned Upside Down?

For those accustomed to viewing things a certain way, it... Read More

Investing in Car Dealerships: How to Do It Right

The financial characteristics of the automobile dealership are attractive:". .... Read More

Get Wealthy With the Rule of 72

When it comes time to retire how many people would... Read More

Economic Survival in the 21st Century - the Three Key Questions to Ask

In this "special report", I want to pose a few... Read More

Variable Annuities

You know all the articles you read about annuities that... Read More

Is Starting A Business For Me? What To Consider Before Starting A Business

Do you have the right temperament?Starting a small business is... Read More

Why You Need To Buy and Sell Gold Coins (Part 2)

How to Collect Rare Coins For Fun and ProfitTime has... Read More

Investor Guide to Financial Health

Step 1: Spend less than you earnPerhaps the simplest financial... Read More

Dumb Money

Many people have, at one time or another, taken some... Read More

Forex Trading Best Practices

FOREX, the term for the FOReign EXchange market, is an... Read More

Reading Between The Lines In Annual Proxy Statements

Upper Saddle River, N.J. - May 11, 2005 - Now... Read More

Why the Rich Keep Getting Richer

Rich people: fortunate, lucky, selfish, and arrogant? Or highly educated,... Read More

Credit Scores = ROI Profits for Real Estate Investors

Strong credit saves real estate investors money on mortgage finance... Read More

Commodities - The Next Big Wave of Fortune Building

Have you often wished you could have got in on... Read More

The Realities Of Market Timing

Market timing systems are based on patterns of activity in... Read More

Art Investing for a Financial Future

When we think of investing we probably conjure images in... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll... Read More

How to Terror-Proof Your Money

"To drift is to be in hell, to be in... Read More

Trading For A Living - Part 2

In part 1 of this article I started to look... Read More

Can Your Annuity Do This?

Okay, so I can tell you I have sat in... Read More

Time is Money and We Are Running Out of Both!

One of the fundamental principles of finance is the concept... Read More

Trading Tips No 3: Online Trading and Investing: Buy, Hold, and Hope

So you have learned how to trade the markets by... Read More

Dont Catch a Falling Knife

One of the most common mistakes made by inexperienced investors... Read More

Inflation Proof Your Investment Portfolio with ETF?s

Even though inflation has been relatively quiet in the U.S.... Read More

Franchise Investing, Franchise Opportunities and Franchising Renewals

Have you considered buying a franchise instead of trying to... Read More

Trading Is Not Rocket Science!

Despite what some people may lead you to believe; day... Read More

Volatile Oil

The Light Crude Continuous Contract fell from $67.70 a barrel... Read More

Bearish or Bullish?

If you are interested in stock investing and the stock... Read More

Caveat Emptor: You May Owe Taxes Despite 401(K) Losses!

One among many ways you lose money in non-indexed mutual... Read More

Remembering TEOTWAWKI and Learning from It

Its only been about 5 years since we had major... Read More

Why have Investment Plans for the Stock Market

If you do not have an investment plan in the... Read More

Short Term Savings Products

When you invest, it simply means that you are putting... Read More