The Stairway to Retirement Planning Heaven

If there’s a bustle in your hedgerow,
Don’t be alarmed now,
It’s just a spring clean for the May queen…

If you have any idea what Robert Plant is talking about here, feel free to let me know. But, esoteric lyrics notwithstanding, there are some good retirement planning lessons we can learn from Led Zeppelin’s “Stairway to Heaven,” believe it or not…

1) Stairway to Heaven, arguably the most famous rock song of all time, was never released as a single to the general public. For several weeks (maybe months) after it was first introduced, you couldn’t even hear it by buying the entire album, because the album hadn’t been released yet. Literally the only way to hear the song was on the radio. Eventually, you could buy Zeppelin’s untitled fourth studio album (often known simply as Led Zeppelin IV) if you wanted to be able to hear the song whenever you wanted.

So what does this have to do with your financial planning?

Well, just as the radio stations of the day initially served as the only conduit between the artist and the consumer, there are some things in the financial world that you just can’t access without professional help.

As an example, I was talking with someone recently—we’ll call him Jimmy—who decided that he’d discovered a shortcut to assembling his portfolio. Jimmy’s brother was working with a financial advisor who had constructed a relatively well-diversified portfolio of mutual funds for him. So Jimmy said to his brother, “Look, just show me what this guy has you invested in and I’ll put together a portfolio that looks identical, but I won’t have to pay any fees or commissions to an advisor.”

So that’s what he did. He picked the exact same funds, weighted with the exact same allocation as his brother’s account.

Fast forward two years. His brother’s account was up 7.2%. But Jimmy’s account was only up 5.6%.

So what happened?

What Jimmy didn’t realize was that the advisor was buying institutional shares for his brother, which meant the internal costs of the funds were much lower. Jimmy was buying the exact same funds (or, at least, they had the same name), but he didn’t have access to the institutional shares. Essentially, Jimmy was buying the funds at retail while his brother was getting them at wholesale. And over the course of just a couple of years, that made a pretty substantial difference in his portfolio.

2) John Paul Jones elected to not use a bass guitar on Stairway to Heaven because he thought the song sounded more like a folk tune and the bass wouldn’t really fit. So instead, he added a string section, keyboards, and flutes. Very different from anything Zeppelin had done in the past, but it worked perfectly in this instance.

At some point in your financial life, you’re going to reach a point where you can’t just keep doing the same thing you’ve always done.

Most people usually reach this point once they get within 5-10 years of retirement. At this stage, I generally start to hear statements like…

“At this point, I don’t have a very high risk tolerance.” Or…

“We’re not that interested in making a lot more money, we just don’t want to lose.”

Some people adopt that mindset earlier than they probably should, and some arrive there much later than they should (or they never shift their mindset at all).

The problem is that most people intuitively and emotionally know that they need to be doing something different, they’re just not sure how to tangibly make it happen. In other words, they know that the bass guitar isn’t a good fit for the song they’re currently singing, they just have no idea how to work in the string section instead.

And, of course, that’s what we’re here for. So, to quote Stairway to Heaven once again…

Yes, there are two paths you can go by
But in the long run
There’s still time to change the road you’re on…