Three Wishes for 2012

I cherish a gift of pyrite I received many years ago. It’s shiny, heavy and multi-faceted. Similar to its common name, fool’s gold, the bright and shiny object represents “things aren’t what they appear to be.” Perhaps my attraction is due to my skeptical nature – what can go wrong? Or it’s central to the process of problem solving – there are many paths to get to the mountain top. And over the years, I’ve replaced the original gift many times as other admirers gained possession.

Fear and anger are the two most common areas of discussion with clients. Anxiety about the economy, volatile markets, global uncertainties, and even the direction of America shake people’s confidence. However, you have choices and some measurable control of your financial future by understanding the options and trade-offs available. In this era of uncertainty and challenge, I offer 3 wishes for the coming year.

Solve Your Puzzle – Successful people plan for the future, and adapt as needed. Recall the last time you built a jigsaw puzzle. You had a box cover as a guide, put all the pieces on the table, and a group of people helped you assemble the puzzle. I understand times are difficult. The world changes. If your goals haven’t changed, then stick to your plan. Or perhaps you need to redesign your box cover (goals), re-map your action plan, or get new players (or resources) at the table to assist you. Adversity strikes, but prevail. Madame Curie defied the ‘experts’ who claimed that radium was scientifically impossible, Beethoven wrote some of his greatest masterpieces after he became deaf, and Michelangelo took on the stone discarded by the sculptor Agostino d’Antonio to create David.

Retire Later – Austerity has hit the homes of many due to layoffs, cutbacks, and depressed 401k and real estate values. Retooling and reshaping is widespread amongst individuals and businesses. Deferring a full-time life of leisure is a necessity for some, and welcomed by others (e.g. sense of purpose or worth, employing your talents, and ‘staying engaged’). Solutions include increasing the early retirement age for Social Security (solvency), raising the age when pension payments must begin – currently 70-1/2 – to extend the duration of retirement accounts, and changing laws that discourage continued work (e.g. earnings limits for SS retirement benefits).

Read the Label – Is the strategy, investment, or rider consistent with your plan, or is it an illusion? Enhance financial literacy and beware the ‘bright and shiny objects.’ Avoid the big mistakes including chasing yield (vs total return), choosing perceived ‘safety’ at the potential cost of losing to inflation, or buying because all the cool kids are doing it. There’s no getting by the trade-off between risk and return. Know the risks including liquidity, control, and flexibility.

May the Mayan prophecy be change, not end, and the price of pyrite go sky high.

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