Are You Captaining the Titanic of Retirement Plans?

I've been interested in the history of and the events surrounding the demise of the great ship R.M.S. (Royal Mail Ship, if you were curious) Titanic since I was a young child -- well before the modern day movie that so popularized the event.

Most of us know the story -- a confluence of bad-luck factors and ill-advised decisions that led to one of the greatest maritime disasters in history. What many of us fail to realize however, is that a great ship like the Titanic on its maiden voyage, bears many similar characteristics to a retirement plan. The decisions we make as to how we captain our retirement vessel can lead us either to a tragic ending such as the one the Titanic met, or allow us to sail happily into the sunset after a long-lasting and relatively uneventful career.

Here are some of the ways in which a retirement could mirror that fateful voyage, and how I plan to avoid captaining the Titanic of retirement plans.

Overconfidence

Thinking of a retirement plan as "unsinkable" can lead to overconfidence and breed a level of complacency when it comes to preparations, precautions, and attention to investments. As with the Titanic, allowing a retirement plan to plow ahead, regardless of the potential obstacles and issues that lay ahead could prove disastrous.

It's one thing to have faith in investment decisions, or hold a steady financial course, but turning a blind eye to potential risks without considering the possible repercussions of certain decisions could have a plan running head long into a major retirement iceberg and leave me foundering and alone to face the consequences. This is why I evaluate my retirement plans and investments regularly in order to stay apprised of my financial course.

Altering Financial Course

Like turning the Titanic, altering the financial course of retirement plans can take time, and if I don't act quickly enough in doing so at certain times, it could leave me without enough time to avoid disaster.

While very few, if any of us, can time the markets precisely, bringing the essential tools to bear in order to make informed decisions can help avoid having to make last minute and possibly incorrect choices as to how to alter a retirement course. Listening to and reading the latest financial news, paying attention to global and domestic events and trends, watching how investments react to these events and other market shifts, as well as having and maintaining a properly diversified portfolio are a few of the ways in which I keep apprised of the direction of my retirement plan and act quickly enough to alter it should a course change be needed.

Watertight Investment Compartments

I look at a well-diversified portfolio as the watertight compartments that will hopefully keep my retirement plan afloat. However, just as with the Titanic, a retirement plan will likely stay afloat with several compartments flooded, but with too many full of water, your portfolio may be destined to sink with your retirement dreams.

While I know that I can't plan for every situation, keeping my retirement plan diversified, and reassessing this diversification regularly can keep my retirement watertight. It's often not just a drop in the stock market or a rise in inflation, but a multitude of converging factors like a significant drop in the stock markets, the demise of real estate values, high unemployment, world turmoil, inflation, and similar downturns all occurring in a relatively short amount of time that can sink a retirement ship. And if you think those factors sound an awful lot like the present world and economic situation, you're not alone!

Retirement Safety Precautions

While I may not expect to ever use my retirement plan lifeboats, and I may never need them, as illustrated by the Titanic, such safety devices can be good to have just in case. In a retirement plan, items such as cash, commodities, inflation protected bonds, and tangible assets such as property, antiques, collectibles, and similar items can act as retirement lifeboats. A retirement voyage isn't meant to be continued on them alone, but they can help to preserve a retirement temporarily in the event of an unforeseen emergency.

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Disclaimer:

The author is not a licensed financial, or retirement professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.