When you hear someone talk about “Old Faithful”, what comes to your mind? If you are like me, you will think of the magnificent geyser in Yellowstone National park. After initial thoughts of the geyser, I suggest your thoughts drift to your income during retirement.
My wife and I were recently on vacation and one of the attractions we wanted to see was “Old Faithful”. When we told one of the locals in Bozeman Montana that we wanted to see the geysers in Yellowstone, they asked why. They recommended instead that we go see some of the wildlife in the park. They stated you could drive all that distance and if your timing was not perfect you would miss the eruption of a geyser. We considered their recommendation for a bit, but thought together out loud, “This is not true for Old Faithful”.
Why do you think Old Faithful was such a must see for us and attracts thousands of visitors a year?
- Is it because it is the highest geyser in the world?
- Is it because it has the most spectacular eruptions?
- Is it because the eruptions are rare occasional events like an eclipse?
The answers to these questions are no, no and no. None of these are the reason for Old Faithful’s popularity. The reason people travel from around the world to gaze at Old Faithful is because of its consistency and reliability. I think you would want to use these same attributes to describe your income in retirement.
More than 3 million people a year visit Yellowstone National park and many of them make the trek to see Old Faithful and the other geysers. Old Faithful is said to be the most predicable geographic feature on earth. It erupts from 1.5 to 5 minutes approximately every 1 hour and 30 minutes. Because of the predictability of Old Faithful and the fact that area around it is easily accessible, this is what makes it one of the main attractions of the entire park.
When it comes to creating a retirement portfolio, you need to think about how to create a reliable income source during good and bad times in the stock market. The way you do this is by adding fixed income to your asset allocation. If we were to experience another market downturn like the great recession, we know this is not the time to be selling our equity positions. If we are forced to sell our equity positions during a downturn to fund our retirement spending then, it can blunt the ability of our portfolio to provide income for us later in retirement. This is because these funds will never get to participate in a market recovery. But if we have fixed income assets as part of our portfolio, we can use these assets to fund our retirement spending which gives a chance for the equity portion of our portfolio to recover. This works because normally when the stock market goes down fixed income will hold its value or go up. Having a proper portfolio does not mean having one that will realize the highest returns during good times, but one which will allow you to meet your goals in good and bad times.
Just as with Old Faithful, one of the best attractions about your retirement portfolio should be its ability to provide you with reliable and consistent income during your retirement years.
Is your retirement portfolio currently designed to be an “Old Faithful” income source for you during retirement? You can add your response to this question at the bottom of this blog. Do not forget to follow me on Twitter @IfAdvice and Facebook StalwartFinancialPlanning
Author
Isaac is a Fee-Only (no products sold) Certified Financial Planner® Practitioner. Isaac founded Stalwart Financial Planning with offices in Fayetteville NC and Durham NC. Isaac provides comprehensive planning and investment management services to individuals from all walks of life. Isaac can be reached by phone at 910-867-8464, or by email (iallen@StalwartPlanning.com). Visit him at Stawart Financial Planning www.StalwartPlanning.com.