Our son, Everett, is an example of when things go right.
By age two, were we up at night counting breaths per minute and tracing every sharp intake at his collarbone? No, not with him. Did we have broken bones, allergies, stitches, speech issues, or surgeries? No, not with him. Did we have worries about our daycare provider that forced us to shift careers and priorities to make things work? No, things went right, and a huge shout-out to Jodie’s House Daycare in Independence for caring for our kids so we could financially provide.
By age four, we had this awesome kid who then looked more like a kid and less like a toddler. Have you ever felt that? The soul-crushing, heart in the throat moment where you see a picture and realize the baby face is gone?
He learned how to ride a bike. He built pillow forts, lost his temper, built more forts, and lost his temper. He learned how to count, rather quickly due to the frequency of time-outs. He tried new foods (but never asparagus), started to read, and learned how to win a game and more importantly, lose a game.
At age five, we now have a kid about to enter kindergarten who has never faced adversity or hardship in his life - no curveballs when it comes to Everett. He’s our middle child who was born to be the youngest, and we tried our best to invest in him, and our family, early.
I remember sitting in a classroom at Simon Kenton High School and seeing a chart about the advantages of early investing. The chart looked something like this:
*This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
And yes, all well and good. Message received - the earlier, the better, but when you retire and begin relying on your investments for your primary source of income, you may think, if there's a downturn in the market, the earlier, the better, right? Wrong.
So many life events could spin us sideways, such as medical expenses, long-term care, home-related major repairs or upsizing, layoffs, early retirement, or a bad market right when we don't need it most. This is referred to as the sequence of returns, which is the order in which investment returns occur. Sequence of returns matter a lot, particularly during retirement or when you're withdrawing funds. Even if the average return over time is the same, experiencing negative returns early in retirement can significantly impact your portfolio's longevity, in other words, your financial outlook into your 70s, 80s, and beyond.
Think of it like baseball: if your team hits a losing streak right at the start of the season, it might eliminate you from the postseason before you even get there. Similarly, early losses in your portfolio can be tough to recover from if you're withdrawing funds during that time. To mitigate this risk, strategies like maintaining a diversified portfolio, using a "bucket approach" for short-term liquidity, or delaying withdrawals during market downturns can help keep your financial game strong. All the things that a financial advisor can ready for you.
So how do you prepare for the unexpected? Have a solid financial plan to keep you in the game for when things don't go right. Play smart and be ready for whatever life throws your way.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.