“Nobody goes there nowadays, it’s too crowded.”
I don’t know what Yogi Berra was referencing when he dropped that quip, but I can only assume he was talking about Brigs at the Park on Highway 55 in Durham. Nobody even thinks about going there after church on Sunday because it’s just too crowded.
But Yogi’s quotes are good for more than just brunch advice. We can actually extract a lot of retirement planning wisdom from some of the things he said. Let’s break down a few classic Yogi-isms and find the financial planning wisdom within…
“I never said most of the things I said.”
Have you ever had an experience where you thought you were buying something with a particular feature or benefit, but then down the road you discover that everything you remember from the sales pitch isn’t actually true?
Cable companies are the worst examples of this. The sales guy will promise you literally anything just to get the sale made. Then when the tech guy shows up to install everything, you suddenly find out that the laws of physics don’t mesh with what the sales guy told you.
“They said the TV would be able to read your brainwaves and you could change the channel just by thinking about it and you don’t even have to use the remote? No ma’am, we can’t actually do that.”
But good luck getting anyone at the cable company to acknowledge the fact that you were led astray.
“Oh, Ted told you that? He’s not with the company anymore.” Or in other words, “We never said most of the things we said.”
In the financial world, this confusion usually manifests itself in the form of investment projections. It’s important to understand the difference between something that’s contractually guaranteed to happen and something that could happen. If you’re being given a sales pitch for a particular product, there’s a good chance that a lot of time will be spent on what could happen. Be sure you have a clear understanding of what’s being promised, as opposed to what’s being projected.
“A nickel ain’t worth a dime anymore.”
Well Yogi, I’m not positive that a nickel was ever worth a dime, if we’re being technical. But your point is understood. Inflation can really take a toll on the buying power of a dollar.
When you think about the fact that inflation hums along at a rate somewhere between 2.25-to-3% per year (depending on which statistician you ask), that metric by itself doesn’t seem all that daunting.
But once you start adding up the cumulative effect of inflation over the course of a 30-year retirement, suddenly the situation appears to be a bit more daunting. If you’re retiring at 63 and you want to spend $8,000 every month, that means you’re going to spend $16,000 each month when you’re 85, if you want to have the same buying power.
Most people understand the concept of inflation, but haven’t really stopped to assess just how much it needs to be factored into their retirement income planning.
“It’s like déjà vu all over again.”
The cycles in the stock market usually look pretty similar. Things are going well and everybody is buying, then there’s a crash or a correction, and suddenly everybody is panicking and selling. Nobody can predict when these things are going to happen, but the way that people behave during these periods is always startlingly predictable.
And everybody always thinks they learned their lesson from the last crash…until we get a few years down the road and suddenly everybody behaves the same way they did during the last crash.
I spend a decent portion of my week talking to other advisors around the country, and the consensus is that most of them aren’t bringing on nearly as many new clients as they were five or six years ago. The reason for that is five or six years ago, the crash of 2008 was still very fresh in everyone’s mind, and they recognized the need for help with their retirement planning.
Today, in 2017, it’s almost as if nobody remembers that crash. Most people don’t perceive the need for any help or guidance. The average investor is quite content with the performance of their 401k, and assumes that they’ve finally gotten the hang of this game called investing. The reality, of course, is that a bull market has the power to cover up a lot of mistakes, so you don’t recognize the things you’re doing wrong.
But then the market crash will come and it will be déjà vu all over again.
The key, as always, is having a solid plan in place that addresses all of these issues and more—inflation, market volatility, tax efficiency, predictable income, etc.
Because, as Yogi said, “If you don’t know where you’re going, you might wind up some place else.”